The ITO, Ward-2(6), Baroda V. M/s. Rudraksh Developers, Baroda

ITA 2127/AHD/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0207 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 19-10-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 29-08-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Capital expenditure
• Section: 143(3); 142(1); 80IB; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD BEFORE SHRI R.P.TOLANI, JM, & SHRI MANISH BORAD, AM. ITA NO. 2127/AHD/2011 ASST. YEAR: 2008-09 ITO, WD-2(6), BARODA. VS. M/S RUDRAKSH DEVELOPERS, RUTU VILLA, OPP. YASH COMPLEX, GOTRI ROAD, BARODA. APPELLANT RESPONDENT PAN AAIFR 1340J APPELLANT BY SHRI K. MADHUSUDAN, SR. DR RESPONDENT BY SMT. URVASHI SHODHAN, AR DATE OF HEARING: 19/10/2016 DATE OF PRONOUNCEMENT: 21/10/2016 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER . THIS APPEAL BY THE REVENUE FOR ASST. YEAR 2008-09 IS DIRECTED AGAINST THE ORDER OF LD. CIT(A) DATED 6.6.2011 VIDE APPEAL NO.CAB/II- 245/10-11, PASSED AGAINST ORDER U/S 143(3) OF THE I T ACT, 1961 (IN SHORT THE ACT) FRAMED ON 21/12/2010 BY ITO, WD-2(6) , BARODA. REVENUE HAS RAISED FOLLOWING GROUNDS :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE ID CIT (APPEALS) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE DEDUCTION U/S.80IB(10) R.W.S.80IB(L) OF THE INCOME-TAX ACT ON THE PROFIT DERIVED FROM SALE OF UNUTILIZED FSI, WITHOUT APPRECIATING THAT THIS PROF IT IS NOT AN ELEMENT OF PROFITS DERIVED FROM THE BUSINESS ACTIVITY OF DEVELOPMENT A ND CONSTRUCTION OF THE HOUSING PROJECT RELATING TO THE SALE OF TENEMENTS. ITA NO. 2127/AHD/2011 ASST. YEAR 2008-09 2 2. THE APPELLANT CRAVES LEAVE TO ADD TO, AMEND OR ALTE R THE ABOVE GROUNDS AS MAY BE DEEMED NECESSARY. RELIEF CLAIMED IN APPEAL IT IS PRAYED THAT THE ORDER OF THE CIT (APPEALS) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT ASSESS EE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF BUILDER S AND DEVELOPER. RETURN OF INCOME WAS E-FILED ON 23.9.3008 DECLARING TOTAL INCOME AT NIL AFTER CLAIMING DEDUCTION U/S 80IB(10) OF THE AC T AT RS.1,26,51,588/-. THE CASE WAS SELECTED FOR SCRUTIN Y ASSESSMENT AND NOTICE U/S 143(2) OF THE ACT FOLLOWED BY NOTICE U/S 142(1) ALONG WITH QUESTIONNAIRE WAS DULY SERVED ON THE ASSESSEE. NECE SSARY COMPLIANCE WAS MADE BY THE ASSESSEE ALONG WITH AUD IT REPORT IN FORM NO.10CCB, AUDITED FINANCIAL STATEMENTS, DEVELO PMENT AGREEMENT AND OTHER DETAILS. LD. ASSESSING OFFICER OBSERVED THAT ASSESSEE HAS PURCHASED LAND MEASURING 12917 SQ.M. A ND APPROVAL WAS OBTAINED FROM BARODA MUNICIPAL CORPORATION IN T HE NAME OF PARTNER OF THE ASSESSEE. LD. ASSESSING OFFICER WAS SATISFIED WITH THE FUNDAMENTAL CONDITION OF THE APPROVAL BEING ACCORDE D TO THE PARTY DESIROUS OF CARRYING ON THE HOUSING DEVELOPMENT AND WAS SATISFIED THAT ASSESSEE IS ENTITLED TO CLAIM DEDUCTION U/S 80 IB(10) OF THE ACT. HOWEVER, LD. ASSESSING OFFICER WAS OF THE FIRM VIEW THAT DEDUCTION U/S 80IB(10) OF THE ACT IS RESTRICTED ONLY TO THE PROFI TS DERIVED FROM THE ACTIVITIES OF DEVELOPMENT AND CONSTRUCTION OF HOUSI NG PROJECT PURPORTEDLY UNDERTAKEN BY THE ASSESSEE AND NOT IN R ESPECT OF THE PROFITS DERIVED FROM THE SALE OF UNUTILIZED FSI REL ATABLE TO THE TENEMENTS. ACCORDINGLY, LD. ASSESSING OFFICER CALC ULATED THE PROFITS ITA NO. 2127/AHD/2011 ASST. YEAR 2008-09 3 RELATABLE TO SALE OF UNUTILIZED FSI AT RS.34,17,840 /- BY OBSERVING AS BELOW :- 6. SINCE THE ELIGIBLE PROFITS FOR CLAIM OF DEDUCTIO N U/S. 80IB (10) CAN ONLY RELATE TO THOSE FROM THE PROJECT OF DEVELOPMENT AND CONSTRUCT ION, THE PROFITS ATTRIBUTABLE TO THE SALE OF UNUTILIZED FSI NOT RELATING TO DEVELOPMENT AND CONSTRUCTION UNDERTAKEN BY THE ASSESSEE SHALL NOT BECOME ELIGIBLE FOR THE SAID CLA IM. PENALTY PROCEEDINGS U/S 271(L)(C) OF THE IT. ACT ARE INITIATED SEPARATELY F OR FURNISHING INACCURATE PARTICULARS OF INCOME. THE VALUES THEREOF ARE COMPUTED AS TABLE BE LOW: CALCULATION OF AREA AND COST OF LAND NOT UTILIZED F OR CONSTRUCTION BUT SOLD PROJECT TOTAL PERMISSIBLE FSI AVAILABLE FOR CONSTRUCTION (SQ MTRS) = TOTAL LAND X 1.6 FSI UTILIZED (SQ MTRS) FSI UNUTILIZED (SQ MTRS) L. RUTU VILLA 20667 10774 9893 TOTAL LAND UTILIZED (SQ MTRS) PROPORTIONATE AREA OF LAND UTILIZED (SQ MTRS) - UTILIZED FSI / 1.6 PROPORTIONATE AREA OF LAND UNUTILIZED (SQ MTRS) RUTU VILLA 12917 6734 6183 NET PROFIT SHOWN BY THE ASSESSEE 84,00,056 LESS: PROFIT ALLOWED ON CIVIL CONSTRUCTION 12,60,008 NET PROFIT OTHER THAN CONSTRUCTION ACTIVITY 71,40,048 PROFIT RELATABLE TO UTILIZED FSI SOLD 37,22,208 PROFIT RELATABLE TO SALE OF FSI UNUTILIZED FSI SOLD 34,17,840 AS DISCUSSED IN PARA 5, THE INADMISSIBILITY OF DEDU CTION U/S. 801B TO THE PROFIT DERIVED FROM SALE OF UNUTILIZED FSI RELATING TO SOL D UNITS, WORKS OUT AT RS. 34,17,840/, AS DISCUSSED ABOVE SHALL BE TAKE EFFECT. IN THIS CA SE, THEREFORE, THE TOTAL INCOME SHALL BE WORKED OUT AS UNDER: ITA NO. 2127/AHD/2011 ASST. YEAR 2008-09 4 3. AGGRIEVED ASSESSEE WENT IN APPEAL BEFORE LD. CIT (A) AND SUCCEEDED IN FULL AS THE DISALLOWANCE OF RS.34,17,8 40/- MADE U/S 80IB(10) OF THE ACT, WAS DELETED BY LD. CIT(A) BY O BSERVING AS BELOW:- 2. THE ONLY EFFECTIVE GROUND OF APPEAL IS THAT THE LEARNED ASSESSING OFFICER HAS ERRED IN DISALLOWING THE CLAIM OF RS.34,17,840/- U/ S. 80IB(10) OF THE INCOME-TAX ACT CONSIDERING IT AS PROFITS ATTRIBUTABLE TO THE SALE OF UNUTILIZED FSI. 2.1 . THE ASSESSEE IN ITS RETURN OF INCOME HAS CLAIMED DE DUCTION U/S. 80IB(10). DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER NOTED THAT THE ASSESSEE HAD UNDERTAKEN TO CONSTRUCT ONLY A PAR T OF THE FSI AVAILABLE TO IT UNDER THE APPROVAL ACCORDED TO IT BY THE LOCAL AUTH ORITY. THE ASSESSING OFFICER HELD THAT PROFITS ARISING FROM SALE OF UNUTILISED F SI CANNOT BE ATTRIBUTABLE TO THE PROFITS ATTRIBUTABLE TO THE DEVELOPMENT AND CONSTRU CTION OF THE PROJECT. THE ASSESSING OFFICER, THEREFORE, RESTRICTED THE CLAIM OF DEDUCTION U/S. 80IB(10). 2.2. IT IS CONTENDED BY THE AUTHORIZED REPRESENTATI VE, SHRI MANISH SHAH, CA THAT SIMILAR ISSUE CAME UP BEFORE THE HON'BLE ITAT, AHMEDABAD, IN ITA NO.2482/AHD./2006 IN THE CASE OF M/S. RADHE DEVELOP ERS & OTHERS. THE ITAT, AHMEDABAD IN ITS ORDER HELD THAT - '63.A QUESTION HAS ALSO BEEN RAISED BY THE REVENUE THAT THE PROFIT EARNED BY THE ASSESSEE ARE NOT FOR DEVELOPING AND B UILDING HOUSING PROJECT ALONE BUT FOR THE SALE OF EXTRA FSI, WHICH HAS NOT BEEN UTILIZED FOR DEVELOPING AND BUILDING HOUSING PROJECT ON A PE RUSAL OF THE PROVISIONS OF SEC. 80IB(10). WE FIND THAT IT IS NOT MANDATORY REQUIREMENT TO FULLY UTILIZE PERMISSIBLE FSI; THERE IS NO CONDITION AS TO FSI UNDER THE SCHEME OF THE PROVISIONS OF SEC. 80IB (10) OF THE ACT- THERE IS NO QUESTION OF SELLING UNUSED FSI TO THE I NDIVIDUAL BUYER FOR EACH PROJECT AND ALSO THERE IS NO QUESTION OF CALC ULATING THE PROFITABILITY ON FSI AS THE SAME HAS NOT BEEN CONTEMPLATED U/S 80 IB(10) OF THE ACT. ON VERIFICATION OF THE SALE DEED EXECUTED IN FAVOUR OF BUYERS OF THE RESIDENTIAL HOUSES, IT IS CLEAR THAT THE ASSESSEE H AD MADE THIS SALE DEED FOR SALE OF PLOT OF LAND. FURTHER, ON VERIFICA TION OF DEVELOPMENT AGREEMENT WITH THE LAND OWNER, WE FIND THAT HERE AL SO THE REFERENCE IS WITH RESPECT TO LAND AREA ONLY. IN BOTH THE DOCUMEN TS ASSESSEE HAD NOT ACQUIRED RIGHTS AND HAS NOT RELINQUISHED RIGHTS WIT H REFERENCE TO FSI FURTHER, ON VERIFICATION OF APPROVED MAP FOR EACH U NIT IS WITH REFERENCE TO BUILT UP AREA ONLY. UNDER THE CIRCUMSTANCES, THE AS SESSEE HAS NEVER DEALT WITH FSI, BOTH IN TERMS OF ACQUIRING RIGHTS IN THE LAND AND FOR RELINQUISHMENT OF SUCH RIGHTS IN THE LAND. THE CALC ULATION GIVEN IN ITA NO. 2127/AHD/2011 ASST. YEAR 2008-09 5 APPROVED PLAN IS OF MAXIMUM PERMISSIBLE FSI AND BY GIVING SUCH CALCULATION IT IS NOT MADE MANDATORY BY ANY PROVISI ONS OF ANY ACT TO MAKE CONSTRUCTION TO THE FULLEST EXTENT OF MAXIMUM PERMI SSIBLE FSI. THE UTILIZATION OF FSI BY THE BUILDER DEVELOPER DEPENDS ON MANY FACTORS LIKE SITUATION OF PLOT, THE TYPE OF . LOCALITY, AND THE TYPE OF BUYERS' AFFORD ABILITY. IT IS THE MARKET FORCE, WHICH DETERMINES THE AVERAG E SIZE OF THE RESIDENTIAL UNIT -A COMMERCIAL DECISION, WHICH PREVAILS FOR THE PURPOSE OF CARRYING OUT THE BUSINESS AND FOR MAKING RESIDENTIAL UNITS AND N OT THE PERMISSIBLE MAXIMUM FSI. IT WOULD ALSO BE IMPOSSIBLE TO CONSTRU CT ANY HOUSING UNIT AS PER THE PROVISIONS OF SEC. 80IB(10) BY UTILIZING THE MAXIMUM FSI. 64. THE AO STATES FURTHER THAT IN THE APPROVED LAY OUT PLAN, THE LOCAL AUTHORITY HAD PERMITTED TO BUILD RESIDENTIAL UNIT O F LESSER AREA THAN THE MAXIMUM PERMISSIBLE BUILT UP AREA ON THE LAND AND T HEREFORE THE ASSESSEE HAD CARRIED OUT ONLY PARTIAL CONSTRUCTION OF THE AVAILABLE FSI VIS- A-VIS THE ENTIRE PLOT OF LAND AVAILABLE FOR DEVELOP MENT WITH THE ASSESSEE. WE FIND THAT THE APPROVED FSI IN REGARD TO THE UNIT S CONSTRUCTED HAS BEEN FULLY UTILIZED FULLY UTILIZED AS PER THE APPROVED P LAN OF THE LOCAL AUTHORITY, NAMELY THE FSI IS FULLY UTILIZED, THE FSI ACTUALLY PASSED AND PERMITTED BY THE AUTHOR/TIES FOR EACH PROJECT. 65. THE AO OBSERVES ASSESSEE HAS SOLD UNUTILIZED F SI WITHOUT INVOLVING ANY PROCESS OF DEVELOPMENT AND CONSTRUCTION, WHICH IS THE PRIMARY CRITERION REQUIRED TO BE SATISFIED FOR THE PURPOSE OF THE CLAIM OF DEDUCTION UNDER SECTION 80IB OF THE ACT HAVE NO FORCE; THAT T HE ASSES SEES HAVE CLAIMED DEDUCTION UNDER SECTION 80IB OF THE ACT FOR THE PROFIT DERIVED DURING THE YEAR UNDER CONSIDERATION FROM THE BUSINE SS OF DEVELOPMENT AND CONSTRUCTION OF A HOUSING PROJECT WHICH THOUGH INCL UDES PROFIT EARNED FROM SALES OF UNUTILIZED FSI OF THE HOUSING PROJECT ALSO AND THAT THE OTHER PART OF UNUTILIZED FSI RELATING TO THE APPROVED UNITS HAVE NOT BEEN CONSTRUCTED OR DEVELOPED BUT BEING SOLD DIRECTLY, ALTHOUGH AS A UN RESTRICTIVE BUNDLE OF RIGHTS ATTACHED WITH THE SALE OF LAND PLOT. AS AFOR ESAID, THERE IS NO REQUIREMENT AS TO THE FSI UNDER THE SCHEME OF PROVI SIONS OF SEC. 80IB(1). IN ANY CASE THE ASSESSEE HAS NOT SOLD FSI OF PLOT, EVEN IF THE UNUTILIZED FSI RIGHTS ARE AVAILABLE WITH THE ASSESSEE, IT IS T HE ONLY WAY LEFT OUT OF UTILIZING SUCH UNUTILIZED FSI IS TO MAKE CONSTRUCTI ON ON TOP OF THE GROUND FLOOR, WHICH IS ALREADY BEING SOLD TO PROSPECTIVE B UYERS. WITH THIS SO CALLED UNUTILIZED SI RIGHTS, IF THE ASSESSEE WISHES TO MAK E FURTHER CONSTRUCTION THAN IT WILL PRACTICALLY IMPOSSIBLE AS THE ASSESSEE IS LEFT WITH NO EASEMENT RIGHTS FOR MAKING CONSTRUCTION OR ACCESS TO GO ON T OP OF THE GROUND FLOOR AS THE GROUND LEVEL RIGHTS ARE ALREADY 'SOLD TO PROSPE CTIVE CUSTOMER. IN THIS SITUATION IT WOULD BE PRACTICALLY IMPOSSIBLE TO MAK E EITHER CONSTRUCTION OR TO GIVE ACCESS FOR CONSTRUCTION MADE. THUS, THE CON CEPT OF ELEMENT OF UNUTILIZED FSI SOLD IS IMAGINARY AND BASED ON SURMI SES AND CONJUNCTURES. ITA NO. 2127/AHD/2011 ASST. YEAR 2008-09 6 2.3. FOLLOWING THE DECISION OF THE ITAT, THE ASSESS ING OFFICER'S RESTRICTION OF THE CLAIM OF DEDUCTION U/S. 80IB(10) IS NOT JUSTIFI ED AND, IS DIRECTED TO BE DELETED. 4. AGGRIEVED, REVENUE IS NOW IN APPEAL BEFORE THE T RIBUNAL. 5. AT THE OUTSET LD. AR SUBMITTED THAT THE CO-ORDIN ATE BENCH, AHMEDABAD IN THE CASE OF ITO VS. NARAYAN HOUSING CO RPORATION IN ITA NOS.2192 & 2193/AHD/2012 FOR ASST. YEARS 2002-0 3 & 2003-04 HAS ADJUDICATED SIMILAR ISSUE BY FOLLOWING THE JUDG MENTS OF HON. JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS.MOO N STAR DEVELOPERS IN TAX APPEAL NOS.549 OF 2008 & OTHERS AND IN THE C ASE OF CIT VS. SHREENATH INFRASTRUCTURE IN TAX APPEAL NOS.147 & 14 8 OF 2014 AND HAVE HELD THAT ASSESSEE SHOULD ALSO BE ALLOWED THE CLAIM OF DEDUCTION U/S 80IB(10) OF THE ACT TO THE EXTENT OF 30% OF UNUTILIZED FSI. LD. AR ALSO SUBMITTED THE REVISED WORKING OF T HE PROFITS RELATABLE TO UNUTILIZED FSI AND AGREED THAT RS.12,75,778/- IS THE PROFIT RELATABLE TO UNUTILIZED FSI, WORKED OUT BY FOLLOWING THE DECI SION OF THE CO- ORDINATE BENCH IN THE CASE OF ITO VS. NARAYAN HOUSI NG CORPORATION (SUPRA) AND AGREED TOWARDS DISALLOWANCE OF RS.12,7 5,778/- AS AGAINST RS.34,17,840/- MADE BY THE ASSESSING OFFICE R. 6. ON THE OTHER HAND LD. DR RELIED ON THE ORDER OF LD. ASSESSING OFFICER AND ALSO SUBMITTED THAT THE JUDGMENT OF HON . JURISDICTIONAL HIGH COURT IS NOT APPLICABLE TO THE CASE OF ASSESSE E AS THAT IS APPLICABLE ONLY IN THE CASE WHERE UNUTILIZED FSI IS NOT MORE THAN 30% OF THE TOTAL FSI AVAILABLE. ITA NO. 2127/AHD/2011 ASST. YEAR 2008-09 7 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. SOLITARY GRIEVANCE OF THE REVENUE IN THI S APPEAL IS AGAINST THE ORDER OF LD. CIT(A) DELETING THE DISALLOWANCE O F CLAIM OF DEDUCTION U/S 80IB(10) OF THE ACT AT RS.34,17,840/- ATTRIBUTA BLE TO THE SALE OF UNUTILIZED FSI. WE FIND THAT ASSESSEE FIRM DEVELOPE D A LAND MEASURING 12917 SQ.M. PERMISSIBLE FSI FOR CONSTRUCT ION WAS 20667 SQ.M. (CALCULATED BY MULTIPLYING OF TOTAL AREA X 1. 6). OUT OF 20667 SQ.M. FSI AVAILABLE FOR CONSTRUCTION, 10774 SQ.M. O F LAND HAS BEEN UTILIZED LEAVING BEHIND UNUTILIZED FSI AT 9893 SQ.M . I.E. 47.87% OF TOTAL FSI AVAILABLE. ASSESSING OFFICER CALCULATED T HE PROFITS RELATABLE TO UNUTILIZED FSI AT RS.34,17,840/-. HOWEVER, LD. C IT(A) DELETED THE IMPUGNED DISALLOWANCE. FURTHER IN THE COURSE OF HEA RING LD. AR HAS REFERRED TO THE DECISION OF THE CO-ORDINATE BENCH I N THE CASE OF ITO VS. NARAYAN HOUSING CORPORATION WHEREIN THE CO-ORDI NATE BENCH HAS ADJUDICATED SIMILAR ISSUE BY DRAWING INFERENCE FROM THE JUDGMENT OF HON. JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V S. MOON STAR DEVELOPER IN TAX APPEAL NOS.549 OF 2008 & OTHERS AN D IN THE CASE OF CIT VS. SHREENATH INFRASTRUCTURE IN TAX APPEAL NOS. 147 & 148 OF 2014 BY OBSERVING AS BELOW :- 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD AND GONE THROUGH THE JUDGMENTS RELIED ON BY THE LD. AR. SOLITARY GRIEVANCE OF THE REVENUE IS AGAINST THE ORDER OF LD. CIT(A) FOR DELE TING OF DISALLOWANCE OF RS.6,03,739/- MADE U/S 80IB(10) R.W.S 80IB(1) OF TH E ACT TOWARDS PROFIT EARNED ON SALE OF UNUTILIZED FSI. WE OBSERVE THAT AT THE T IME OF ASSESSMENT LD. ASSESSING OFFICER MADE ADDITION TAKING TWO ALTERNAT IVES AS PER OF WHICH IN THE FIRST ALTERNATIVE TOTAL DEDUCTION U/S 80IB(10) WAS DISALLOWED WITH THE OBSERVATION THAT ASSESSEE WAS NOT THE OWNER OF THE LAND. HOWEVE R, THIS ADDITION WAS DELETED BY LD. CIT(A) AND REVENUE IS NOT IN APPEAL AGAINST THIS DELETION. IN THE SECOND ALTERNATIVE LD. ASSESSING OFFICER HAS OBSERVED THAT ASSESSEE HAD MADE CONSTRUCTION ON ONLY 40% (APPROX) OF THE TOTAL SPAC E AVAILABLE FOR CONSTRUCTION AS ITA NO. 2127/AHD/2011 ASST. YEAR 2008-09 8 APPROVED BY THE LOCAL AUTHORITY AND THE REMAINING 6 0% OF THE UNUTILIZED FSI WAS SOLD TO THE BUYERS OF CONSTRUCTED PORTION AND SINCE ELIGIBLE FOR CLAIM OF DEDUCTION U/S 80IB(10) OF THE ACT ONLY RELATES TO THOSE PROFI TS WHICH ARE EARNED FROM THE DEVELOPMENT AND CONSTRUCTION OF HOUSING PROJECT THE PROFIT EARNED ON SALE OF UNUTILIZED FSI WAS NOT ELIGIBLE FOR THE SAME. ACCOR DINGLY LD. ASSESSING OFFICER AFTER GIVING RELEVANT FIGURES OF THE TOTAL PERMISSI BLE FSI AVAILABLE AT 1423.7 SQ.M. SUBTRACTED 571.81 SQ.M. ON FSI UTILIZED LEAVING BEH IND 851.89 SQ.M. FSI UNUTILIZED AND PROPORTIONATELY REDUCED THE DEDUCTIO N U/S 80IB(10) OF THE ACT BY RS.6,03,739/-. WE FIND THAT ASSESSEE HAS NOT DISPUT ED THE FACTS AND FIGURES OBSERVED BY LD. ASSESSING OFFICER RELATING TO FSI A VAILABLE FOR CONSTRUCTION, FSI UTILIZED AND FSI UNUTILIZED AS WELL AS CALCULATION OF PROFIT RELATABLE TO SALE OF UNUTILIZED FSI. ASSESSEE IS PRESSING THE CONTENTION THAT FSI PERMISSIBLE IS THE MAXIMUM AREA ON WHICH CONSTRUCTION CAN BE DONE AND PROJECT DEVELOPER IS AT FREE LIBERTY TO UTILIZE THE FSI IN ORDER TO MAKE MA XIMUM GAINS AT THE END OF COMPLETION OF THE PROJECT AND, THEREFORE, THE TOTAL PROFIT DERIVED FROM SUCH PROJECT IRRESPECTIVE OF FSI UTILIZED OR UNUTILIZED IS ELIGI BLE FOR DEDUCTION U/S 80IB(10) OF THE ACT. 9. WE OBSERVE THAT HON. JURISDICTIONAL HIGH COURT H AS DEALT WITH THIS ISSUE OF CLAIM OF DEDUCTION U/S 80IB(10) OF THE ACT FROM SAL E OF UNUTILIZED FSI IN THE CASE OF CIT VS. MOON STAR DEVELOPER THE RELEVANT PORTION OF THE JUDGMENT IS REPRODUCED BELOW :- 22. HAVING HEARD THE LEARNED COUNSEL FOR THE PARTIE S AND HAVING PERUSED THE DOCUMENTS ON RECORD, WE MAY BRIEFLY RECAPITULATE TH E FACTS. THE RESPONDENTS- ASSESSEES WERE ENGAGED IN DEVELOPMENT OF HOUSING PR OJECTS. IN THE CASE OF M/S.MOON STAR DEVELOPERS, AGAINST THE TOTAL FSI OF 15312 SQ. METERS AVAILABLE FOR CONSTRUCTION, AREA OF ONLY 3573 SQ. METERS WAS UTIL ISED. THE RESIDENTIAL UNITS WERE CONSTRUCTED ONLY ON THE GROUND FLOOR CARRYING NO FU RTHER CONSTRUCTION. SUCH RESIDENTIAL UNITS WERE SOLD AND THE ENTIRE SURPLUS WAS CLAIMED AS PROFITS DERIVED FROM ACTIVITY OF DEVELOPING HOUSING PROJECT DEDUCTI BLE' UNDER SECTION 80-IB(10) OF THE ACT. FACTS, WITH MINOR DIFFERENCES, ARE SIMILAR IN ALL THE CASES. 23. SECTION 80IB(10) OF THE ACT PERTAINS TO DEDUCTI ON IN RESPECT OF PROFIT AND GAINS FROM CERTAIN ACTIVITIES. SUB-SECTION (10) THEREOF, AS IS WELL-KNOWN, GRANTS 100% DEDUCTION ON THE PROFIT OF AN ASSESSEE BEING AN UND ERTAKING DEVELOPING AND BUILDING HOUSING PROJECTS ON THE PROFIT DERIVED FRO M SUCH HOUSING PROJECT SUBJECT TO CONDITIONS LAID DOWN THEREIN. SUB-SECTION (10) O F THE SECTION 80-IB AS IT STOOD AT THE RELEVANT TIME READ AS UNDER: '(10) THE AMOUNT OF PROFITS IN CASE OF AN UNDERTAKI NG DEVELOPING AND BUILDING HOUSING PROJECTS APPROVED BEFORE THE 31ST DAY OF MA RCH, 2005 BY A LOCAL AUTHORITY, SHALL BE HUNDRED PER CENT OF THE PROFITS DERIVED IN ANY PREVIOUS YEAR RELEVANT TO ANY ASSESSMENT YEAR FROM SUCH HOUSING PROJECT IF ITA NO. 2127/AHD/2011 ASST. YEAR 2008-09 9 (A) SUCH UNDERTAKING HAS COMMENCED OR COMMENCES DEVELOP MENT AND CONSTRUCTION OF THE HOUSING PROJECT ON OR AFTER THE 1ST DAY OF O CTOBER, 1998, (B) THE PROJECT IS ON THE SIZE OF A PLOT OF LAND WHICH HAS A MINIMUM AREA OF ONE ACRE, AND (C) THE RESIDENTIAL UNIT HAS A MAXIMUM BUILT-UP A REA OF ONE THOUSAND SQUARE FEET WHERE SUCH RESIDENTIAL UNIT IS SITUATED WITHIN THE CITIES OF DELHI OR MUMBAI OR WITHIN TWENTY-FIVE KILOMETERS FROM THE MUNICIPAL LI MITS OF THESE CITIES AND ONE THOUSAND AND FIVE HUNDRED SQUARE FEET AT ANY OTHER PLACE.' WE MAY NOTICE THAT SUBSEQUENTLY AN EXPLANATION CAME TO BE ADDED AT THE END OF THE SAID SUB-SECTION BY FINANCE ACT OF 2009 BUT WIT H EFFECT FROM 1.4.2001 WHICH EXPLANATION READ AS UNDER: 'EXPLANATION FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED TH AT NOTHING CONTAINED IN THIS SUB-SECTION SHALL APPLY TO ANY UN DERTAKING WHICH EXECUTES THE HOUSING PROJECT AS A WORKS CONTRACT AWARDED BY ANY PERSON (INCLUDING THE CENTRAL OR STATE GOVERNMENT).' IN THE NOTES ON CLAUSES EXPLAINING THE INTRODUCTION OF SECTION 80-IB OF THE ACT, IN THE CONTEXT' OF SUBSECTION (10) THEREOF, IT WAS STA TED AS UNDER: 'THE PROVISION ALSO SEEKS TO PROVIDE THAT FOR APPRO VED HOUSING PROJECTS THE PROFITS OF WHICH ARE FULLY DEDUCTIBLE, THE BUILT-UP AREA IN REGIONS OTHER THAN OUTSIDE TWENTY-FIVE KMS. OF MUNICIPAL LIMITS OF DELHI AND M UMBAI, THE BUILT-UP AREA OF THE RESIDENTIAL UNITS DOES NOT EXCEED ONE THOUSAND FIVE HUNDRED SQUARE FEET.' 24. IN THE BUDGET SPEECH FOR THE FINANCIAL YEAR 199 9-2000, THE FINANCE MINISTER IN THE CONTEXT OF TAX BENEFITS UNDER SECTION 80-IA OF THE ACT ON HOUSING PROJECTS, WHILE INCREASING THE MAXIMUM LIMIT OF THE BUILT-UP AREA OF THE UNITS FROM 1000 SQ. FT. TO 1500 SQ. FT. AT ALL LOCATIONS EXCEPT MUMBAI AND DELHI, STATED AS UNDER: '98. THE SECOND ELEMENT OF THIS INCENTIVE PACKAGE R ELATES TO THE SCHEME FOR HOUSING PROJECTS FOR ENJOYING A TAX HOLIDAY UNDER S ECTION 80-IA OF THE INCOME-TAX ACT. THE EXISTING PROVISION, INTER ALIA, REQUIRES THAT THE BUILT-UP AREA OF DWELLING UNITS SHOULD NOT EXCEED 1000 SQ. FEET. THERE HAVE B EEN MANY REPRESENTATIONS THAT IN TOWNS OTHER THAN MUMBAI AND DELHI, THE LAND COST IS RELATIVELY LESS, AND THEREFORE, FOR THE SAME CAPITAL EXPENDITURE INVESTO RS CAN AFFORD TO PURCHASE DWELLING UNITS OF SLIGHTLY LARGER AREAS. IN VIEW OF THIS, IT HAS BEEN REPRESENTED THAT THE CEILING ON BUILT-UP AREAS FOR DWELLING UNITS IN APPROVED PROJECTS BE INCREASED FROM 1000 SQ. FT TO 1500 SQ. FT AT ALL LOCATIONS EX CEPT MUMBAI AND DELHI. I PROPOSE ITA NO. 2127/AHD/2011 ASST. YEAR 2008-09 10 TO ACCEPT THIS SUGGESTION AND MAKE SUITABLE MODIFIC ATIONS IN THE LAW. THIS AMENDMENT IN THE SCHEME FOR TREATING HOUSING PROJEC TS AS INFRASTRUCTURE WILL, I BELIEVE, ALSO 'GIVE A SIGNIFICANT FILLIP TO CONSTRU CTION ACTIVITIES IN THE SMALL TOWNS.' 25. THE SAID PROVISION WAS ADDED FOR EASING THE HOU SING PROBLEM PARTICULARLY FOR THE MIDDLE INCOME GROUP IN URBAN AREAS. IN THIS CON TEXT, IN THE DECISION OF THIS COURT IN RADHE DEVELOPERS, IT WAS OBSERVED AS UNDER : '30. THE ESSENCE OF SUB-SECTION (10) OF SECTION 80- IB, THEREFORE, REQUIRES INVOLVEMENT OF AN UNDERTAKING IN DEVELOPING AND BUI LDING HOUSING PROJECTS APPROVED BY THE LOCAL AUTHORITY. APPARENTLY, SUCH P ROVISION WOULD BE AIMED AT GIVING ENCOURAGEMENT TO PROVIDING HOUSING UNITS IN THE URBAN AND SEMI-URBAN AREAS, WHERE THERE IS PERENNIAL AND ACUTE SHORTAGE OF HOUSING, PARTICULARLY, FOR THE MIDDLE INCOME GROUP CITIZENS. TO ENSURE THAT THE BE NEFIT REACHES THE PEOPLE, CERTAIN CONDITIONS WERE PROVIDED IN SUB-SECTION(LO) SUCH AS SPECIFYING DATE BY WHICH THE UNDERTAKING MUST COMMENCE THE DEVELOPING AND CONSTRUCTION WORK 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 TH AT ONLY THOSE DEVELOPERS WHO THEMSELVES OWN THE LAND WOULD RECEIVE THE DEDUCTION UNDER SECTION 80-13(10) OF THE ACT.' 26. IT CAN THUS BE SEEN THAT DEDUCTION UNDER SECTIO N 80-13(10 ) OF THE ACT WAS GRANTED TO GIVE FILLIP TO THE CONSTRUCTION OF RESID ENTIAL UNITS FOR PERSONS OF MIDDLE INCOME GROUP IN URBAN AND SEMI-URBAN AREAS OF LARGE CITIES AND EVEN SMALL TOWNS WHERE THERE WOULD BE DEARTH OF SUPPLY OF SUCH RESID ENTIAL UNITS. SOME OF THE ESSENTIAL CONDITIONS FOR CLAIMING SUCH DEDUCTION AR E : (A) THAT THE HOUSING PROJECT SHOULD BE APPROVED BY THE LOCAL AUTHORITY BEFORE A SPECIFIED DATE (WHICH WAS EXTENDED FROM TIME TO TIM E); (B) THAT THE UNDERTAKING COMMENCED DEVELOPMENT AND CONS TRUCTION OF THE HOUSING PROJECT AFTER A SPECIFIED DATE; (C) THAT THE PROJECT IS ON THE SIZE AND PLOT OF LAND WH ICH IS OF MINIMUM OF ONE ACRE; (D) THAT EACH RESIDENTIAL UNIT HAS A MAXIMUM BUILT-UP A REA OF 1500 SQ. FEET BARRING CITIES OF MUMBAI AND DELHI AND WITHIN A RAD IUS OF 25 KM OF MUNICIPAL UNITS OF SUCH CITIES WHERE SUCH AREA SHOULD NOT EXC EED 1000 SQ. FT. FURTHER CONDITIONS WERE LATER ON ADDED WHICH INCLUD ED RESTRICTION OF NOT ALLOTTING MORE THAN ONE RESIDENTIAL UNIT TO ANY PERSON WHO IS NOT AN INDIVIDUAL. IN CASE OF ITA NO. 2127/AHD/2011 ASST. YEAR 2008-09 11 ALLOTMENT OF RESIDENTIAL UNIT TO AN INDIVIDUAL, IT WAS FURTHER PROVIDED THAT NO OTHER RESIDENTIAL UNIT IN SUCH HOUSING PROJECT ALLOTTED TO SUCH INDIVIDUAL OR HIS/HER SPOUSE, MINOR CHILDREN OR HINDU UNDIVIDED FAMILY IF SUCH INDIVIDUAL IS A KARTA AND ANY PERSON REPRESENTING SUCH INDIVIDUAL, THE SPOUSE OR THE MINOR CHILDREN OF SUCH INDIVIDUAL OR THE HINDU UNDIVIDED FAMILY IN WHICH S UCH INDIVIDUAL IS THE KARTA. 27. AT THE RELEVANT TIME, THESE LATER CONDITIONS WE RE NOT IN OPERATION. NEVERTHELESS, WHAT CAN BE SEEN FROM THE CONDITIONS WHICH PREVAILE D AT THE RELEVANT TIME IS THAT DEDUCTION WAS AIMED AT PROVIDING 100% TAX EXEMPTION TO AN UNDERTAKING WHICH WAS INVOLVED IN DEVELOPING AND BUILDING OF HOUSING PROJECTS IN ORDER TO MAKE AFFORDABLE RESIDENTIAL UNITS AVAILABLE FOR MIDDLE I NCOME GROUP CITIZENS IN URBAN AND SEMI-URBAN AREAS. TO ENSURE EVEN DISTRIBUTION O F SUCH UNITS AND TO AVOID HOARDING, ADDITIONAL CONDITIONS IN THE FORM OF REST RICTION ON ALLOTMENT TO SAME PERSON OR HIS NEAR RELATIVES WERE ADDED. 28. IN THIS CONTEXT, WE MAY EXAMINE, WHETHER THE DE CISION OF THE ASSESSING OFFICER TO TREAT THE INCOME OF THE ASSESSEES FROM SALE OF F SI SEPARATE AND EXCLUDABLE FROM THE PURVIEW OF SECTION 80-IB(10) OF THE ACT? THE CO NCEPT OF FSI, IS A WELL-KNOWN ONE. LOCAL AUTHORITIES, SUCH AS COIPORATIONS, MUNIC IPALITIES AND PANCHAYATS, FRAME REGULATIONS FOR REGULATING ACTIVITIES OF DEVELOPMEN T OF LANDS WITHIN THEIR LOCAL AREAS. SUCH REGULATIONS ARE POPULARLY REFERRED TO G ENERAL DEVELOPMENT CONTROL REGULATIONS (GDCR). IN ADDITION TO PROVIDING DIFFER ENT ZONES CONTROLLING DEVELOPMENT ACTIVITIES IN DIFFERENT AREAS FOR REGUL ATED AND ORDERLY DEVELOPMENT OF URBAN AREAS, THESE REGULATIONS ALSO PROVIDE FOR VAR IOUS OTHER DETAILS SUCH AS MAXIMUM HEIGHT UP TO WHICH THE CONSTRUCTION CAN BE EARNED 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 B E PROVIDED DEPENDING ON THE NATURE OF BUILDING AND MOST IMPORTANTLY, THE MAXIMU M CONSTRUCTION THAT CAN BE CARRIED OUT ON A GIVEN PIECE OF LAND. THE LAST ELEM ENT, NAMELY, THE RATIO OF THE LAND AREA VERSUS THE MAXIMUM CONSTRUCTION PERMISSIBLE ON SUCH LAND, IS REFERRED TO AS FLOOR SPACE INDEX (FSI FOR SHORT). IT IS THIS FSI W HICH WILL DECIDE THE MAXIMUM AREA OF CONSTRUCTION THAT CAN BE CARRIED OUT ON ANY GIVEN PIECE OF LAND. IT IS, THEREFORE, NOT DIFFICULT TO APPRECIATE THAT BESIDES SEVERAL OTHER FACTORS OF SITUATIONAL AND OTHER ADVANTAGES AND DISADVANTAGES, FSI PERMISS IBLE FOR THE LAND IN QUESTION WOULD BE AN IMPORTANT FACTOR IN THE CONTEXT OF DEVE LOPMENT OF THE LAND. GIVEN ALL OTHER FACTORS SAME, HIGHER THE FSI, THE GREATER THE VALUE OF THE LAND. 29. IT IS IN THIS CONTEXT, WE HAVE TO APPRECIATE TH E UNDER-UTILIZATION OF THE FSI BY THE ASSESSEES IN DIFFERENT HOUSING PROJECTS UNDER C ONSIDERATION. 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 TH E CASES, THE ASSESSEES HAVE COVERED BARELY ABOUT ONE-FOURTH OR ONE-THIRD OF THE PERMISSIBLE FSI. ITA NO. 2127/AHD/2011 ASST. YEAR 2008-09 12 30. FOR ANY COMMERCIAL ACTIVITY OF CONSTRUCTION, BE IT RESIDENTIAL OR COMMERCIAL COMPLEX MAXIMUM UTILIZATION OF FSI IS OF GREAT IMPO RTANCE TO THE DEVELOPER. ORDINARILY, THEREFORE, IT WOULD BE IMPRUDENT FOR A DEVELOPER TO UNDER-UTILIZE AVAILABLE FSI. SALE PRICE OF CONSTRUCTED PROPERTIES IS DECIDED ON THE BUILT-UP AREA. IT CAN THUS BE SEEN THAT GIVEN THE RATE OF CONSTRUC TED AREA REMAINING SAME, NON- UTILIZATION OF AVAILABLE FSI WOULD REDUCE THE PROFI T 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 IN STANCES. IN THE SAME AREA TWO RESIDENTIAL SCHEMES ARE DEVELOPED. BOTH HAVE RESIDE NTIAL UNITS OF 1500 SQ. FEET. IN ONE SCHEME 100% FSI IS USED IN ANOTHER 25% FSI IS U SED AND 75% IS PASSED ON TO THE BUYER OF THE UNIT. PRICE OF THE UNIT IN THE LAT ER SCHEME WOULD FOR APPARENT REASON BE CONSIDERABLY HIGHER THAN THE FORMER BECAU SE THE BUYER THERE GETS NOT ONLY A RESIDENTIAL UNIT OF 1500 SQ. FEET, HE ALSO G ETS THE RIGHT TO BUILD FURTHER CONSTRUCTION OF 4500 SQ. FEET. WHETHER THIS INCLUDE S 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 AC TIVITY OF DEVELOPMENT AND CONSTRUCTION OF RESIDENTIAL UNITS AND FROM SALE OF UNUSED FSI ARE DISTINCT AND SEPARATE AND RIGHTLY SEGREGATED BY THE ASSESSING OF FICER. 31. IT IS TRUE THAT SECTION 80-IB(10) OF THE ACT DO ES NOT PROVIDE THAT FOR DEDUCTION, THE UNDERTAKING MUST UTILIZES L 00% OF THE FSI AVAI LABLE. 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 DEDU CTION UNDER SECTION 80-IB(10) OF THE ACT ON THE PROFIT EARNED ON SALE OF THE PROP ERTY? IF THIS CONCEPT IS ACCEPTED, IN A GIVEN CASE, AN ASSESSEE MAY PUT UP CONSTRUCTIO N OF ONLY 100 SQ. FT. ON THE ENTIRE AREA OF ONE ACRE OF PLOT AND SELL THE SAME T O A SINGLE PURCHASER AND CLAIM FULL DEDUCTION ON THE PROFIT ARISING OUT OF SUCH SALE' U NDER SECTION 80-13(10) OF THE SURELY, THIS CANNOT BE STATED TO BE DEVELOPMENT OF A HOUSING PROJECT QUALIFYING FOR DEDUCTION UNDER SECTION 80-IB(10) OF THE ACT. THIS IS NOT TO SUGGEST THAT FOR CLAIMING DEDUCTION UNDER SECTION 80-IB (10) OF THE ACT, INVARIABLY IN ALL CASES, THE ASSESSEE MUST UTILIZE THE FULL FSI AND ANY SHORTAGE IN SUCH UTILIZATION WOULD INVITE WRATH OF THE CLAIM UNDER SECTION 80-IB(10), BEING R EJECTED. THE QUESTION IS WHERE DOES ONE DRAW THE LINE. IN OUR OPINION, THE ISSUE H AS TO BE SEEN FROM CASE TO CASE BASIS. MARGINAL UNDER-UTILIZATION OF FSI CERTAINLY CANNOT BE A GROUND FOR REJECTING THE CLAIM UNDER SECTION 80-18(10) OF THE ACT. EVEN IF THERE HAS BEEN CONSIDERABLE UNDER-UTILIZATION, IF THE ASSESSEE CAN POINT OUT AN Y SPECIAL GROUNDS WHY THE FSI COULD NOT BE FULLY UTILIZED, SUCH AS, HEIGHT RESTRI CTION BECAUSE OF SPECIAL ZONE/PASSING OF HIGH TENSION ELECTRIC WIRES OVERHEA D, OR ANY SUCH SIMILAR GROUNDS TO JUSTIFY UNDER-UTILIZATION, THE CASE MAY STAND ON A DIFFERENT FOOTING. HOWEVER, IN ITA NO. 2127/AHD/2011 ASST. YEAR 2008-09 13 CASES WHERE THE UTILIZATION OF FSI IS WAY SHORT OF THE PERMISSIBLE AREA OF CONSTRUCTION, LOOKING TO THE SCHEME OF SECTION 80-I B(10) OF THE ACT AND THE PURPOSE OF GRANTING DEDUCTION ON THE INCOME FROM DE VELOPMENT OF HOUSING PROJECTS ENVISAGED THERE-UNDER, 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 S PECIAL GROUND FOR NON- UTILIZATION OF THE FSI. 32. 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 80-18(10) OF THE ACT CANNOT BE DECLIN ED, 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. 33. WHAT, IS AVAILABLE FOR DEDUCTION UNDER SECTION 80IB(10) OF THE ACT IS THE PROFIT OF AN UNDERTAKING DERIVED FROM DEVELOPING AND BUILD ING A HOUSING PROJECT. MERE SALE OF OPEN LAND OR UNUSED FSI AS PART OF THE HOUS ING PROJECT WHERE UTILIZATION OF THE FSI IS WAY SHORT OF PERMISSIBLE LIMITS CANNOT B E SAID TO HAVE BEEN DERIVED FROM SUCH HOUSING PROJECT. TERMS DERIVED FROM, ARISING OUT OR AND 'ATTRIBUTABLE TO' ARE OFTEN TIMES USED IN THE CONTEXT OFF INCOME TAX IN DIFFERENT CONNOTATION. IN THE CASE OF STERLING FOODS (SUPRA), THE ASSESSEE WAS EN GAGED IN PROCESSING PRAWNS AND OTHER SEA-FOOD WHICH IT EXPORTED. IN THE PROCESS, T HE ASSESSEE EARNED IMPORT ENTITLEMENTS TO USE ITSELF OR SELL THE SAME TO OTHE RS. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE INCLUDED SUCH SALE PROC EEDS FOR CLAIMING RELIEF UNDER SECTION 80-HH 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 FR OM THE INDUSTRIAL UNDERTAKING OF THE ASSESSEE. FOR THE APPLICATION OF THE WORDS 'DER IVED 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. 34. 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 ELECTRICI TY. THE APEX COURT HELD THAT THE INTEREST DERIVED BY THE INDUSTRIAL UNDERTAKING OF T HE ASSESSEE ON SUCH DEPOSITS MADE WITH THE ELECTRICITY BOARD CANNOT BE SAID TO F LOW DIRECTLY FROM THE INDUSTRIAL UNDERTAKING ITSELF AND WAS NOT PROFIT EARNED OR GAI N DERIVED BY THE UNDERTAKING FOR THE PURPOSE OF SPECIAL DEDUCTION UNDER SECTION 80HH OF THE ACT. 35. IN THE CASE OF LIBERTY INDIA (SUPRA), THE ASSES SEE WAS ENGAGED IN INFRASTRUCTURE DEVELOPMENT AND CLAIMED DEDUCTION UNDER SECTION 80- 1, 80-IA AND 80-IB, ETC. ON ITA NO. 2127/AHD/2011 ASST. YEAR 2008-09 14 THE DRAWBACK RECEIR - AND DEPB BENEFITS. THE COURT HELD THAT SUCH INCOME CANNOT BE STATED TO BE DERIVED FROM IHE INDUSTRIAL UNDERTA KING. 36. THE CASE OF NIRMA INDUSTRIES LTD (SUPRA) RESTE D ON DIFFERENT FACTS. IT WAS A CASE WHERE THE ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 80-IA OF THE ACT. SUCH CLAIM INCLUDED THE INTEREST RECEIVED FROM TRAD E DEBTORS TOWARDS LATE PAYMENT OF SALE CONSIDERATION. THIS BECAME A MATTER OF DISP UTE BETWEEN THE ASSESSEE AND THE REVENUE. THE COURT HELD IN FAVOUR OF THE ASSESS EE 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, I F 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 I S 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 D ISPOSED OF ACCORDINGLY. 10. WE OBSERVE THAT HON. JURISDICTIONAL HIGH COURT HAS DECIDED THE ISSUE IN FAVOUR OF REVENUE GIVING CLEAR INDICATION THAT DEDU CTION U/S 80IB(10) OF THE ACT IS ALLOWABLE FOR DEVELOPMENT OF HOUSING PROJECT WHERE STRICTLY SPEAKING 100% ON FSI AVAILABLE MAY NOT BE UTILIZED FOR CONSTRUCTION BUT CERTAINLY MAJORITY OF THE FSI SHOULD BE UTILIZED FOR ACTUAL CONSTRUCTION AND DEVE LOPMENT AND THE ISSUE HAS TO BE SEEN FROM CASE TO CASE BASIS. HON. COURT FURTHER OBSERVED THAT MARGINAL UNUTILISATION OF FSI CANNOT BE A GROUND FOR REJECTI NG THE CLAIM U/S 80IB(10) OF THE ACT.. 11. WE FURTHER OBSERVE THAT HON. JURISDICTIONAL HIG H COURT IN THE CASE OF CIT VS. SHREENATH INFRASTRUCTURE (SUPRA) HAS ALSO DEALT WITH SIMILAR ISSUE OF CLAIM OF DEDUCTION U/S 80IB(10) OF THE ACT FROM SALE OF UNUT ILIZED FSI BY OBSERVING AS UNDER :- 3. SECOND QUESTION PERTAINS TO THE REVENUE'S STAND THA T IN THE PROCESS OF DEVELOPING THE HOUSING PROJECT, THE ASSESSEE DID NO T REALIZE THE FULL FSI AVAILABLE FOR DEVELOPMENT. THE ASSESSEE THUS SOLD PART OF THE UNUTILIZED FSI AND THE PROFIT DERIVED FROM SUCH SALE CANNOT BE SAID TO HAVE BEEN AND WOULD NOT ARISE OUT OF THE ASSESSEE'S ACTIVITY OF DEVELOPMENT AND CONSTRUCTION OF HOUSING PROJECT. TO SUCH EXTENT, ASSESSEE'S CLAIM FOR DEDUCTION UNDER SECTIO N 80IB (10) OF THE ACT MUST BE RESTRICTED. IN THIS RESPECT, HEAVY RELIANCE WAS PLA CED BY THE LEARNED COUNSEL FOR THE REVENUE ON THE JUDGMENT PASSED BY THIS COURT IN CAS E OF CIT V. MOON STAR DEVELOPERS [TAX APPEAL NO. 549 OF 2008 DATED 5/11TH MARCH 2014 ]. IN SUCH CASE, THE COURT DID EXAMINE THE REVENUE'S STAND WITH RESP ECT TO VARIOUS ASSESSEES SELLING UNUTILIZED FSI IN THE PROCESS OF DEVELOPMEN T AND CONSTRUCTION OF HOUSING PROJECT. FACTS IN THAT CASE WERE THAT VARIOUS ASSES SEES HAD CLAIMED FULL DEDUCTION ITA NO. 2127/AHD/2011 ASST. YEAR 2008-09 15 UNDER SECTION 80IB (10) OF THE ACT ON THE SOLE CONS IDERATION OF THE RESIDENTIAL UNITS DEVELOPED AND CONSTRUCTED BY THE ASSESSEES FU LFILLING OTHER CONDITIONS UNDER SECTION 801B (10) OF THE ACT. IT WAS, HOWEVER, NOTI CED THAT IN ALL SUCH CASES, THERE WAS HEAVY UNDER UTILIZATION OF FSI. THE UTILIZATION IN VARIOUS CASES RANGED FROM 11% TO 65% AND IN MAJORITY OF CASES, THE CONSTRUCTI ON INVOLVED ONLY ABOUT ONE- FORTH OR ONE-THIRD OF THE PERMISSIBLE FSI. IN THIS CONTEXT, THE COURT UPHELD THE VIEW OF THE REVENUE THAT THE PROFIT RELATABLE TO SUCH SA LE OF UNUTILIZED FSI WOULD NOT BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB (10) OF T HE ACT. IT WAS IN THIS BACKGROUND OF SUCH UNUTILIZED FSI, THE COURT WAS PE RSUADED TO ADOPT SUCH COURSE. IT WAS HELD AND OBSERVED AS UNDER : '28. IN THIS CONTEXT, WE MAY EXAMINE, WHETHER THE D ECISION OF THE ASSESSING OFFICER TO TREAT THE INCOME OF THE ASSESSEES FROM S ALE OF FSI SEPARATE AND EXCLUDABLE FROM THE PURVIEW OF SECTION 80IB(10) OF THE ACT? THE CONCEPT OF FSI, IS A WELL-KNOWN ONE. LOCAL AUTHORITIES, SUCH AS COR PORATIONS, MUNICIPALITIES AND PANCHAYATS, FRAME REGULATIONS FOR REGULATING ACTIVI TIES OF DEVELOPMENT OF LANDS WITHIN THEIR LOCAL AREAS. SUCH REGULATIONS ARE POPU LARLY REFERRED TO GENERAL DEVELOPMENT CONTROL REGULATIONS (GDCR). IN ADDITION TO PROVIDING DIFFERENT ZONES CONTROLLING DEVELOPMENT ACTIVITIES IN DIFFERE NT AREAS FOR REGULATED AND ORDERLY DEVELOPMENT OF URBAN AREAS, THESE REGULATIO NS ALSO PROVIDE FOR VARIOUS OTHER DETAILS SUCH AS MAXIMUM HEIGHT UP TO' WHICH T HE CONSTRUCTION CAN BE CARRIED OUT, MAXIMUM AREA ON THE GROUND FLOOR OR ON OTHER F LOORS WHICH CAN BE COVERED UNDER CONSTRUCTION, MARGIN TO BE LEFT ON SIDES, PAR KING FACILITIES TO BE PROVIDED DEPENDING ON THE NATURE OF BUILDING AND MOST IMPORT ANTLY, THE MAXIMUM CONSTRUCTION THAT CAN BE CARRIED OUT ON A GIVEN PIE CE OF LAND. THE LAST ELEMENT, NAMELY, THE RATIO OF THE LAND AREA VERSUS THE MAXIM UM CONSTRUCTION PERMISSIBLE ON SUCH LAND, IS REFERRED TO AS FLOOR SPACE INDEX (FSI FOR SHORT). IT IS THIS FSI WHICH WILL DECIDE THE MAXIMUM AREA OF CONSTRUCTION THAT C AN BE EARNED OUT ON ANY GIVEN PIECE OF LAND. IT IS, THEREFORE, NOT DIFFICULT TO A PPRECIATE THAT BESIDES SEVERAL OTHER FACTORS OF SITUATIONAL AND OTHER ADVANTAGES AND DIS ADVANTAGES, FSI PERMISSIBLE FOR THE LAND IN QUESTION WOULD BE AN IMPORTANT FACTOR I N THE CONTEXT OF DEVELOPMENT OF THE LAND. GIVEN ALL OTHER FACTORS SAME, HIGHER THE FSI, THE GREATER THE VALUE OF THE LAND. 29. IT IS IN THIS CONTEXT, WE HAVE TO APPRECIATE TH E UNDER UTILIZATION OF THE FSI BY THE ASSESSEES IN DIFFERENT HOUSING PROJECTS UNDER C ONSIDERATION. 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 TH E CASES, THE ASSESSEES HAVE COVERED BARELY ABOUT ONE-FOURTH OR ONE-THIRD OF THE PERMISSIBLE FSI. 30. FOR ANY COMMERCIAL ACTIVITY OF CONSTRUCTION, BE IT RESIDENTIAL OR COMMERCIAL COMPLEX MAXIMUM UTILIZATION OF FSI IS OF GREAT IMPO RTANCE TO THE DEVELOPER. ITA NO. 2127/AHD/2011 ASST. YEAR 2008-09 16 ORDINARILY, THEREFORE, IT WOULD BE IMPRUDENT FOR A DEVELOPER TO UNDER-UTILIZE AVAILABLE FSI. SALE PRICE OF CONSTRUCTED PROPERTIES IS DECIDED ON THE BUILT UP AREA. IT CAN THUS BE SEEN THAT GIVEN THE RATE OF CONSTRUC TED AREA REMAINING SAME, NON- UTILIZATION OF AVAILABLE FSI WOULD REDUCE THE PROFI T 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 IN STANCES. IN THE SAME AREA TWO RESIDENTIAL SCHEMES ARE DEVELOPED. BOTH HAVE RESIDE NTIAL UNITS OF 1500 SQ. FEET. IN ONE SCHEME 100% FSI IS USED IN ANOTHER 25% FSI IS U SED AND 75% IS PASSED ON TO THE BUYER OF THE UNIT. PRICE OF THE UNIT IN THE LAT ER SCHEME WOULD FOR APPARENT REASON BE CONSIDERABLY HIGHER THAN THE FORMER BECAU SE THE BUYER THERE GETS NOT ONLY A RESIDENTIAL UNIT OF 1500 SQ. FEET, HE ALSO G ETS THE RIGHT TO BUILD FURTHER CONSTRUCTION OF 4500 SQ. FEET. WHETHER THIS INCLUDE S 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 AC TIVITY OF DEVELOPMENT AND CONSTRUCTION OF RESIDENTIAL UNITS AND FROM SALE OF UNUSED FSI ARE DISTINCT AND SEPARATE AND RIGHTLY SEGREGATED BY THE ASSESSING OF FICER. 31. IT IS TRUE THAT SECTION 80IB(10) OF THE ACT DOE S NOT PROVIDE THAT FOR DEDUCTION, THE UNDERTAKING MUST UTILIZE 100% OF THE FSI AVAILA BLE. 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 DEDU CTION UNDER SECTION 80IB(10) OF THE ACT ON THE PROFIT EARNED ON SALE OF THE PROPERT Y? IF THIS CONCEPT IS ACCEPTED, IN A GIVEN CASE, AN ASSESSEE MAY PUT UP CONSTRUCTION O F ONLY 100 SQ. FT. ON THE ENTIRE AREA OF ONE ACRE OF PLOT AND SELL THE SAME TO A SIN GLE PURCHASER AND CLAIM FULL DEDUCTION ON THE PROFIT ARISING OUT OF SUCH SALE UN DER 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 I S NOT TO SUGGEST THAT FOR CLAIMING DEDUCTION UNDER SECTION 801B (10) OF THE A CT, INVARIABLY IN ALL CASES, THE ASSESSEE MUST UTILIZE THE FULL FSI AND ANY SHORTAGE IN SUCH UTILIZATION WOULD INVITE WRATH OF THE CLAIM UNDER SECTION 80IB(10), BEING RE JECTED. THE QUESTION IS WHERE DOES ONE DRAW THE LINE. IN OUR OPINION, THE ISSUE H AS TO BE SEEN FROM CASE TO CASE BASIS. MARGINAL UNDERUTILIZATION OF FSI CERTAINLY C ANNOT BE A GROUND FOR REJECTING THE CLAIM UNDER SECTION 80IB(10) OF THE ACT. EVEN I F 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 RESTRI CTION BECAUSE OF SPECIAL ZONE, PASSING OF HIGH TENSION ELECTRIC WIRES OVERHEAD, OR ANY SUC H SIMILAR GROUNDS TO JUSTIFY UNDER UTILIZATION, THE CASE MAY STAND ON A DIFFERENT FOO TING. HOWEVER, IN CASES WHERE THE UTILIZATION OF FST IS WAY SHORT OF THE PERMISSIBLE AREA OF CONSTRUCTION, LOOKING TO THE SCHEME OF SECTION 80IB(LG) OF THE ACT AND THE PURPO SE OF GRANTING DEDUCTION ON THE INCOME FROM DEVELOPMENT OF HOUSING PROJECTS ENVISAG ED THEREUNDER, BIFURCATION OF ITA NO. 2127/AHD/2011 ASST. YEAR 2008-09 17 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 AS SESSEES HAVE MADE ANY SPECIAL GROUND FOR NON-UTILIZATION OF THE FSI. 32. 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, CAN NOT BE ACCEPTED. AS NOTED EARLIER, IN CASE OF M/S. MOON STAR DEVELOPERS AND MANY OTHER ASSESSEES, 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 L EFT UNUSED. 33. WHAT IS AVAILABLE FOR DEDUCTION UNDER SECTION 80IB(10) OF THE ACT IS THE PROFIT OF AN UNDERTAKING DERIVED FROM DEVELOPING AND BUILDING A HOUSING PROJECT. MER E SALE OF OPEN LAND OR UNUSED FSI AS PART OF THE HOUSING PROJECT WHERE UTILIZATIO N OF THE FSI IS WAY SHORT OF PERMISSIBLE LIMITS CANNOT BE SAID TO HAVE BEEN DERI VED FROM SUCH HOUSING PROJECT. TERMS 'DERIVED FROM', 'ARISING OUT OF AND 'ATTRIBUT ABLE TO' ARE OFTEN TIMES USED IN THE CONTEXT OF INCOME TAX IN DIFFERENT CONNOTATION. IN THE CASE OF STERLING FOODS (SUPRA), THE ASSESSEE WAS ENGAGED IN PROCESSING PRAWNS AND O THER SEA FOOD WHICH IT EXPORTED. IN THE PROCESS, THE ASSESSEE EARNED IMPORT ENTITLEM ENTS TO USE ITSELF OR SELL THE SAME TO OTHERS. DURING THE YEAR UNDER CONSIDERATION, THE AS SESSEE 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 S AID TO BE DERIVED FROM THE INDUSTRIAL UNDERTAKING OF THE ASSESSEE. FOR THE APP LICATION OF THE WORDS 'DERIVED FROM', THERE MUST BE A DIRECT NEXUS BETWEEN THE PRO FITS AND GAINS AND THE INDUSTRIAL UNDERTAKING AND IN THE CASE ON HAND, THE NEXUS WA S NOT DIRECT BUT ONLY INCIDENTAL.' 4. IN THE PRESENT CASE, THE FACTS ARE SOMEWHAT DIFF ERENT. THE ASSESSEE, IN THE PROCESS OF DEVELOPING TWO HOUSING PROJECTS, HAD UTILIZED 9595. 64 SQ.M OF BUILD-ABLE AREA AGAINST THE MAXIMUM PERMISSIBLE AREA OF 13004 SQ.M AND IN O THER CASES, PUT UP CONSTRUCTION OF 5997.28 SQ.M AGAINST MAXIMUM PERMISSIBLE CONSTRU CTION ON 8127.75 SQ.M. UNDER UTILIZATION, IF AT ALL WAS IN THE MARGINAL RANGE OF 25% TO 30%. AS HELD BY THIS COURT IN CASE OF MOON STAR DEVELOPERS (SUPRA) EVERY CASE OF EVEN MARGINAL UNDER UTILIZATION OF FSI WOULD NOT BE HIT BY DISALLOWANCE OF DEDUCTIO N UNDER SECTION &U1H OF THE ACT IN THE RESULT, TAX APPEALS ARE DISMISSED. 12. NOW FROM GOING THROUGH BOTH THE JUDGMENTS OF HO N. JURISDICTIONAL HIGH COURT, WE OBSERVE THAT THE ISSUE REGARDING DEDUCTIO N U/S 80IB(10) OF THE ACT FROM SALE CONSIDERATION OF UNUTILIZED FSI HAS TO BE SEEN IN THE OVERALL CONTEXT SO MUCH SO THAT CERTAINLY 100% FSI CANNOT BE UTILIZED FOR C ONSTRUCTION AND BUSINESS EXPEDIENCY AND FOR THE OVERALL SUCCESS OF THE PROJE CT 25% TO 30% OF THE OPERATION GAP REMAINS TO BE UNUTILIZED. HOWEVER, IN THE CASE THE OPERATION OF UNUTILIZED FSI IS EXORBITANT I.E. MORE THAN 30% OF THE TOTAL PERMISSIBLE AREA THEN THE MATTER HAS TO BE LOOKED INTO FROM A DIFFERENT A NGLE AND ONE CANNOT IGNORE THE POSSIBILITY OF THE SITUATION WHEREIN CLAIM UNDER SE CTION 80IB(10) IS INTENTIONAL ITA NO. 2127/AHD/2011 ASST. YEAR 2008-09 18 DEDUCTION FROM SALE OF UNUTILIZED FSI ON WHICH NO C ONSTRUCTION OR DEVELOPMENT HAS BEEN DONE AND FOR MERE SALE OF SUCH UNUTILIZED LAND OR PORTION DEDUCTION U/S 80IB(10) OF THE ACT IS CLAIMED. WE FIND THAT IN THE CASE OF ASSESSEE ALMOST 60% OF THE PERMISSIBLE FSI REMAINED UNUTILIZED I.E. NO CONSTRUCTION WAS MADE THEREON. AS PER THE WORKING APPEARING IN THE ASSESS MENT ORDER, WE FIND THAT IN THE PROJECT VAIKUNTH-I PERMISSIBLE FSI WAS 1423.7 S Q.M. AND FSI UTILIZED FOR CONSTRUCTION WAS 571.81 SQ.M. WHICH LEFT BEHIND UNU TILIZED FSI AT 851.89 SQ.M. NOW OBSERVING THESE FACTS OF THE CASE IN THE LIGHT OF JUDGMENTS OF HON. JURISDICTIONAL HIGH COURT, WE FIND THAT HON. HIGH C OURT IN THE CASE OF MOON STAR DEVELOPERS (SUPRA) CAME ACROSS THE FACT THAT ONLY 2 3% OF THE FSI WAS UTILIZED AND DECISION WAS GIVEN IN FAVOUR OF REVENUE BY CONF IRMING THE DISALLOWANCE MADE FOR SALE OF UNUTILIZED FSI. HOWEVER, IT WAS AL SO OBSERVED BY HON. HIGH COURT THAT UTILIZATION OF FSI HAS TO BE INTROSPECTE D WITH THE OVERALL PROJECT AND ONE HAS TO KEEP SPACE FOR THE MARGIN FOR KEEPING SO ME PORTION OF FSI UNUTILIZED DEPENDING ON CASE TO CASE. WE OBSERVE THAT THE SAME HON. BENCH OF THE JURISDICTIONAL HIGH COURT WHICH HAS DECIDED THE ISS UE IN FAVOUR OF REVENUE IN THE CASE OF MOON STAR DEVELOPERS(SUPRA) HAD DEALT WITH SIMILAR ISSUE OF ALLOWABILITY OF DEDUCTION U/S 80IB(10) OF THE ACT FOR SALE OF UN UTILIZED FSI IN THE CASE OF M/S SHREENATH INFRASTRUCTURE (SUPRA) AND CAME WITH THE VIEW THAT 25-30% OF NON- UTILISATION OF FSI IS PERMISSIBLE AND ASSESSEE SHOU LD NOT BE DEVOID OF CLAIMING DEDUCTION U/S 80IB(10) OF THE ACT. 13. RESPECTFULLY FOLLOWING THE JUDGMENT OF HON. JUR ISDICTIONAL HIGH COURT IN THE CASE OF SHREENATH INFRASTRUCTURE (SUPRA), WE AR E OF THE VIEW THAT ASSESSEE SHOULD BE ALLOWED TO CLAIM DEDUCTION U/S 80IB(10) O F THE ACT TO THE EXTENT OF 30% OF UNUTILIZED FSI. WE HEREBY DEEM IT FIT TO SUSTAIN THE DISALLOWANCE TO 50% AS THE ASSESSEE HAS 60% UNUTILIZED FSI AND AFTER GIVING TH E BENEFIT OF 30% UNUTILIZED FSI. ACCORDINGLY, ASSESSEE WILL GET RELIEF OF RS.3, 01,869.50 AS AGAINST DISALLOWANCE MADE AT THE TIME OF ASSESSMENT AT RS.6 ,03,739/-. ACCORDINGLY, THIS GROUND OF REVENUE IS PARTLY ALLOWED. 7. APPLYING THE FACTS OF THE CASE BEFORE US TO THE DECISION OF CO- ORDINATE BENCH, AHMEDABAD, WE OBSERVE THAT ASSESSEE IS ALSO ENTITLED TO CLAIM DEDUCTION U/S 80IB(10) OF THE ACT TO THE EXTENT OF 30% OF UNUTILIZED FSI WHICH WAS HITHERTO DISALLOWED BY ASSESSING OFFICER TOWARDS TOTAL UNUTILIZED FSI. ITA NO. 2127/AHD/2011 ASST. YEAR 2008-09 19 8. LD. AR HAS FILED A WORKING SHEET CALCULATING THE REIN THE REVISED WORKING OF PROFITS RELATABLE TO UNUTILIZED FSI NOT ELIGIBLE FOR DEDUCTION U/S 80IB(10) OF THE ACT AT RS.12,75,,778/- WHICH IS REPRODUCED BELOW:- PROJECT TOTAL PERMISSIBLE FSI AVAILABLE FOR CONSTRUCTION IN SQ.M. FSI UTILIZED (SQ.M.) FSI UNUTILIZED (SQ.M.) TOTAL LAND UTILIZED (SQ.M.) PROPORTIONATE AREA OF LAND UTILIZED (SQ.M.) PROPORTIONATE AREA OF LAND UNUTILIZED (SQ.M.) RUTU VILLA (ACTUAL) 20667 (100%) 10774 (52.13%) 9893 (47.87%) 12917 6734 6183 RUTU VILLA 20667 (100%) 16974 (52.13% + 30%) 3693 (17.87%) 12917 10609 2308 WORKING DONE BY AO IN ASST. ORDE R REVISED WORKING AS PER ABOVE CALCULATION RS.71,40,048/- *6734 1291 71,40,048/- * 10609 12917 = RS.37,22,208/- (PROFIT RELATABLE TO UTILIZED FSI) RS.34.17,840/- (PROFIT RELATABLE TO UNUTILIZED FSI) =RS.58,64,270/- (PROFIT RELATABLE TO UTILIZED FSI) RS.12,75,778/- (PROFIT RELATABLE TO UNUTILIZED FSI RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDI NATE BENCH AND GOING THROUGH THIS REVISED CALCULATION OF INADMISSI BLE DEDUCTION U/S 80IB(10) TOWARDS UNUTILIZED FSI, WE ARE OF THE VIE W THAT A SUM OF RS.12,75,778/- SHOULD BE SUSTAINED AS DISALLOWANCE U/S 80IB(10) OF THE ACT TOWARDS THE PROFITS RELATABLE TO UNUTILIZED FSI. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD. CIT(A) AND PARTLY ALLOW THE APPEAL OF REVENUE. 9. OTHER GROUND IS GENERAL IN NATURE, WHICH NEEDS N O ADJUDICATION. ITA NO. 2127/AHD/2011 ASST. YEAR 2008-09 20 10. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST OCTOBER, 2016 SD/- SD/- (R. P. TOLANI) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 21/10/2016 MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 20/10/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 20/10/2016 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 24/10/2016 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: