The ACIT, Circle-2(2), Now DCIT, Circle-1(2), Baroda V. M/s. Shakti Developers, Baroda

ITA 2768/AHD/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8406 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 01-10-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ROOP CHAND
• Section: 143(3); 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENCH AHMEDABAD BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER, AND SHRI S. S. GODARA, JUDICIAL MEMBER. ITA NO. 2768/AHD/2015 (ASSESSMENT YEAR: 2011-12) ERSTWHILE ASSESSING OFFICER ACIT, CIR.2(2), BARODA PRESENT ASSESSING OFFICER THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(2), 2 ND FLOOR, AAYAKAR BHAVAN, RACE COURSE CIRCLE, BARODA APPELLA NT VS. M/S. SHAKTI DEVELOPERS SAUJANYA SOCIETY, NR. VADSAR VILLAGE, KALALI, GIDC, VADSAR ROAD, BARODA 390012 RESPONDENT PAN: AAQFS3259K /BY REVENUE : SHRI ROOPCHAND, SR. D.R. /BY ASSESSEE : NONE /DATE OF HEARING : 12.09.2017 /DATE OF PRONOUNCEMENT : 22.09.2017 ORDER PER S. S. GODARA, JUDICIAL MEMBER THIS REVENUES APPEAL FOR ASSESSMENT YEAR 2011-12 A RISES AGAINST THE CIT(A)-5, VADODARAS ORDER DATED 15.06.2015 IN CASE NO. CAB/5-101/14-15, REVERSING ASSESSING OFFICERS ACTION DISALLOWING AS SESSEES SECTION 80IB(10) DEDUCTION CLAIM OF RS.39,33,822/- IN ASSESSMENT ORD ER DATED 30.01.2014, IN PROCEEDINGS U/S. 143(3) OF THE INCOME TAX ACT, 196 1; IN SHORT THE ACT. ITA NO. 2768/AHD/15 (DCIT VS. M/S. SHAKTI DEVELOPE RS) A.Y. 2011-12 - 2 - CASE CALLED TWICE. NONE APPEARS AT ASSESSEES BEH EST. THE REGISTRY SENT AN RPAD NOTICE AS WELL DATED 29.08.2017. THE SAME STA NDS RETURNED BACK WITH THE REMARK NOT FOUND. WE THEREFORE PROCEED EX PARTE AGAINST THE ASSESSEE IN THE INSTANT APPEAL. 2. WE COME TO REVENUES SOLE SUBSTANTIVE GRIEVANCE NOW SEEKING TO REVIVE THE ABOVESTATED SECTION 80IB(10) DEDUCTION DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ASSESSEES FAILURE IN NOT UTI LIZING MAJOR PORTION OF FSI. THERE IS NO DISPUTE ABOUT THE FACT THAT THIS ASSESSEE IS A FIRM ENGAGED IN THE HOUSING CONSTRUCTION AND DEVELOPMENT BUSINESS. THIS IS NOT THE REVENUES CASE AT ALL THAT IT NOT OTHERWISE ENTITLED FOR THE IMPUGNED SECTION 80I B(10) DEDUCTION. ITS SOLE SUBSTANTIVE ENDEAVOR IS TO TREAT ASSESSEES INCOME DERIVED FROM SALE OF UNUTILIZED FSI AS NOT ELIGIBLE FOR THE ABOVE DEDUCTION CLAIM. WE THEREFORE COME TO THE RELEVANT PARTICULARS PERTAINING TO THE INSTANT FSI ISSUE. IT EMERGES FROM THE CASE FILE THAT THE ASSESSEES TOTAL FSI AVAILABLE FOR DEVELOP MENT, UTILIZE AND THE ONE SOLD UNUTILIZED INTER ALIA ADMEASURE(S) 37,859.20, 15,55 2.11 & 22,307.09 SQ.MTRS.; RESPECTIVELY. THIS LEAVES BEHIND TOTAL UNUTILIZED LAND MEASURING 23,662 SQ.MTRS. THE ASSESSING OFFICER DISALLOWED ASSESSEES DEDUCTI ON CLAIM PERTAINING TO THE ABOVESTATED UNUTILIZED FSI AFTER HOLDING THAT THE S AME COULD NOT BE TREATED AS PROFIT DERIVED FROM THE DEVELOPMENT OF THE HOUSING PROJECT IN QUESTION. ALL THIS RESULTED IN THE IMPUGNED DISALLOWANCE OF RS.39,33,822/-. 3. THE CIT(A) REVERSES ASSESSING OFFICERS ABOVE AC TION AS UNDER: 4.3.2. I HAVE CAREFULLY CONSIDERED THE CONTENTION S OF THE APPELLANT SUMMARIZEDIN PARA ABOVE. AS FAR AS APPELLANTS CON TENTION THAT WHEN THE ACT IS SILENT REGARDING THE CONDITION WHICH HE REVENUE HAS RAISED AND AS ACCEPTED BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF RADHEY DE VELOPERS (SUPRA), I DONT FIND ANY MERIT IN IT SINCE IN THE LATER DECISION IN CASE OF MOONSTAR DEVELOPERS (SUPRA), THE HONBLE HIGH COURT HAS ACCEPTED THAT THERE IS N O REQUIREMENT IN THE ACT REGARDING UTILIZATION OF FSI. HENCE, THIS CONTENTI ON IS REJECTED. COMING TO OTHER CONTENTIONS OF THE APPELLANT REGARDING COMPELLING R EASONS FOR UNDER UTILIZATION OF FSI, IT IS FOUND THAT THE APPELLANT WAS PREVENTED B Y THE VARIOUS BY LAWS WHICH ARE APPLICABLE TO TENEMENT FROM UTILIZING MAXIMUM PERMI SSIBLE FSI. THE APPELLANT HAS DEMONSTRATED THAT IN CASE OF TENEMENT CONSTRUCTION, UTILIZATION OF MAXIMUM PERMISSIBLE FSI IS NOT POSSIBLE UNDER ANY CIRCUMSTA NCES BECAUSE OF HEIGHT RESTRICTION AND UNUTILIZED FSI JUST REMAINS ON PAPE R. IN THE CASE OF CIT VS ITA NO. 2768/AHD/15 (DCIT VS. M/S. SHAKTI DEVELOPE RS) A.Y. 2011-12 - 3 - MOONSTAR DEVELOPERS [2014] 367 ITR 621(GUJ.) , HONBLE HIGH COURT HAVE OBSERVED THAT IF THERE ARE COMPELLING REASONS FOR U NDER UTILIZATION OF FSI, DEDUCTION CANNOT BE DENIED ON GROUNDS OF UNDER UTIL IZATION EVEN IF THERE IS CONSIDERABLE UNDER UTILIZATION. THE OBSERVATION OF HIGH COURT IS IN PARA 31 WHICH IS AS UNDER: 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 AVAILABLE. THE QUESTION HOWEVER IS, CAN AN UNDERTAKING UTILIZE ONL Y A SMALL PORTION OF THE AVAILABLE AREA FOR CONSTRUCTION, SELL THE PROPERTY LEAVING AMPLE SCOPE FOR THE PURCHASER TO CARRY ON FURTHER CONSTRUCTION ON H IS OWN AND CLAIM FULL DEDUCTION UNDER SECTION 80IB(10) OF THE ACT ON THE PROFIT EARNED ON SALE OF THE PROPERTY? IF THIS CONCEPT IS ACCEPTED, IN A GIV EN CASE, AN ASSESSEE MAY PUT UP CONSTRUCTION OF ONLY 100 SQ. FT. ON THE ENTI RE AREA OF ONE ACRE OF PLOT AND SELL THE SAME TO A SINGLE PURCHASER AND CLAIM F ULL 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 HOUSIN G PROJECT QUALIFYING FOR DEDUCTION UNDER SECTION 80IB(10) OF THE ACT. THIS I S NOT TO SUGGEST THAT FOR CLAIMING DEDUCTION UNDER SECTION 80IB (10) OF THE A CT, INVARIABLY IN ALL CASES, THE ASSESSEE MUST UTILIZE THE FULL FSI AND A NY SHORTAGE IN SUCH UTILIZATION WOULD INVITE WRATH OF THE CLAIM UNDER S ECTION 80IB(10), BEING REJECTED. THE QUESTION IS WHERE DOES ONE DRAW THE L INE. IN OUR OPINION, THE ISSUE HAS TO BE SEEN FROM CASE TO CASE BASIS. MARGI NAL UNDERUTILIZATION OF FSI CERTAINLY CANNOT BE A GROUND FOR REJECTING THE CLAIM UNDER SECTION 80IB(10) OF THE ACT. EVEN IF THERE HAS BEEN CONSIDE RABLE 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 S IMILAR GROUNDS TO JUSTIFY UNDER UTILIZATION, THE CASE MAY STAND ON A DIFFEREN T 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 DE VELOPMENT 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 MAD E ANY SPECIAL GROUND FOR NON-UTILIZATION OF THE FSI. IN THE SUBSEQUENT DECISION OF HON'BLE GUJARAT HIGH COURT IN CASE OF SHREENATH INFRASTRUCTURE (SUPRA) , HON'BLE HIGH COURT HAVE CONSIDERED THEIR OWN DECI SION AND HAVE HELD THAT IF THERE IS MARGINAL UNDER UTILI ZATION IN RANGE OF 25-30%, THE 80IB DEDUCTION CANNOT BE DISALLOWED ON THE GROUND O F UNDER UTILIZATION OF FSI. THE OBSERVATION OF HIGH COURT IN PARA 4 IS AS UNDER : '4. IN THE PRESENT CASE, THE FACTS ARE SOMEWHAT DIF FERENT. 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 OTHER CASES, PUT UP CONSTRUCTION OF 5997.28 SQ.M AGAINST MAXIMUM PERMISSIBLE CONSTRUCTION ON 8127.75 SQ.M. UNDER UTI LIZATION, IF AT ALL WAS IN THE MARGINAL RANGE OF 25% TO-30%. AS HELD BY THIS C OURT IN CASE OF MOON STAR DEVELOPERS (SUPRA) EVERY CASE OF EVEN MARGINAL UNDER UTILIZATION OF ITA NO. 2768/AHD/15 (DCIT VS. M/S. SHAKTI DEVELOPE RS) A.Y. 2011-12 - 4 - FSI WOULD NOT BE HIT BY DISALLOWANCE OF DEDUCTION U NDER SECTION 80IB OF THE ACT. 4.3.3. IN THE CASE OF THE APPELLANT, IT HAS BEEN DE MONSTRATED THAT ABOUT 32% OF PLOT SIZE IN CASE OF TENEMENT CANNOT BE UTILIZED BECAUSE OF HEIGHT RESTRICTION. IN THE EXAMPLE GIVEN BY THE APPELLANT HE HAS SUBMITTED THA T IN CASE OF 1000 SQ. FT, PLOT, MAX. FSI PERMISSIBLE IS 1600 SQ. FT. BUT MAX. PERMI SSIBLE CONSTRUCTION IN A TENEMENT IS ONLY 1280 (400 GF+ 440FF + 440SF), IT M EANS 320 SQ. FT CANNOT BE UTILIZED I.E. 32% OF PLOT SIZE. THERE ARE VARIOUS O THER FACTORS WHICH LEAD TO UNDER UTILIZATION LIKE SIZE OF COMMON PLOT. IN CASE THE S IZE OF PLOT IS MORE, THE COMMON PLOT SIZE WILL BE COMMENSURATELY HIGHER, WHICH IS T URN LEAD TO HIGHER % OF UN- UTILIZED FSI. THE APPELLANT HAS ESTABLISHED THAT HE WAS PREVENTED BY SUFFICIENT COMPELLING CAUSE IN NOT UTILIZING FSI FULLY. AS HEL D BY THE HON'BLE GUJARAT HIGH COURT DECISION IN CASE OF MOONSTAR DEVELOPERS (SUPRA) AND SHREENATH INFRASTRUCTURE (SUPRA) WHEN THE APPELLANT WAS PREVENTED FROM UTILIZING FS I FULLY, THE PROPORTIONATE DEDUCTION CANNOT BE DISALLOWED. I N APPELLANT'S CASE EVEN IF WE EXCLUDE THIS 32% FROM THE PERMISSIBLE FSI, THEN THE RATIO OF FSI UNDERUTILIZED TO THE UTILIZED FSI IS WITHIN THE PERMISSIBLE LIMIT AS HELD BY THE HON'BLE GUJARAT HIGH COURTS IN CASE OF SHREENATH INFRASTRUCTURE (SUPRA) . IN VIEW OF THE FACTS OF THE PRESENT CASE AND RATIO OF JURISDICTIONAL HIGH COURT , THE APPEAL OF THE APPELLANT IS ALLOWED AND THE DISALLOWANCE MADE BY THE AO IS DELE TED. THE AO IS DIRECTED TO ALLOW THE DEDUCTION U/S 80IB(10) OF THE ACT FULLY A S CLAIMED BY THE APPELLANT. 4. WE HAVE HEARD LEARNED DEPARTMENTAL REPRESENTATIV E STRONGLY REITERATING REVENUES SOLE SUBSTANTIVE PLEA SEEKING TO DISALLOW ASSESSEES SECTION 80IB(10) DEDUCTION CLAIM ON ACCOUNT OF SALE OF UNUTILIZED FS I. THERE CAN HARDLY BE ANY DISPUTE ABOUT THE HONBLE JURISDICTIONAL HIGH COURT S TWO DECISIONS IN MOONSTAR DEVELOPERS AND SHREENATH INFRASTRUCTURE (SUPRA) ADJ UDICATE THE INSTANT ISSUE OF THE IMPUGNED DEDUCTION IN CASE OF UNUTILIZED FSI. LEAR NED CIT(A) HIMSELF IS VERY FAIR IN RESTRICTING THEIR LORDSHIPS RATIO IN MOONSTAR S CASE THAT THE INSTANT ISSUE OF UNUTILIZED FSI; EVEN IF INVOLVING CONSIDERABLE UNDE R UTILIZATION HAS TO BE ADJUDICATED IN VIEW OF VARIOUS SPECIAL GROUNDS INVO LVED I.E. SUCH AS HEIGHT RESTRICTION BECAUSE OF SPECIAL ZONE PASSING OF HIGH TENSION ELECTRIC WIRES OVER HEAD OR ANY OTHER SIMILAR GROUND. THEIR LORDSHIPS LATT ER DECISION IN CASE OF SHREENATH INFRASTRUCTURE (SUPRA) UPHOLDS MINOR VARIATION IN F SI UNUTILIZED IN THE RANGE OF 25 TO 30%. IT EMERGES FROM THE CASE FILE THAT LEARNED CIT(A) THEREAFTER OBSERVES THAT ASSESSEES CASE ALSO FALLS IN THE ABOVE CATEGORY SI NCE COMING UNDER HEIGHT RESTRICTION. HE NOWHERE PROVES IN ABOVE EXTRACTED PORTION OF THE LOWER APPELLATE ORDER AS TO HOW THE ENTIRE NON UTILIZATION OF FSI C AN BE HELD TO BE A CASE OF HEIGHT RESTRICTION. THERE IS NO OTHER CLARIFICATION FORTH COMING IN THE CASE FILE WHICH COULD ITA NO. 2768/AHD/15 (DCIT VS. M/S. SHAKTI DEVELOPE RS) A.Y. 2011-12 - 5 - INDICATE COGENT MATERIAL TO TREAT ASSESSEES CASE A S THAT OF A COMMON PLOT SIZE HAVING RELATIVELY HIGHER NON UTILIZATION OF FSI BEY OND 32% BECAUSE OF HEIGHT RESTRICTION AS PER THE ABOVE HONBLE JURISDICTIONAL HIGH COURTS DECISIONS. WE THEREFORE RESTORE THE IMPUGNED ADDITION TO THE EXTE NT IT PERTAINS TO 68% OF THE UNUTILIZED FSI. THE ASSESSING OFFICER IS DIRECTED TO FRAME A CONSEQUENTIAL COMPUTATION AFTER AFFORDING ADEQUATE OPPORTUNITY TO THE ASSESSEE. 5. THIS REVENUES APPEAL IS PARTLY ALLOWED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 22 ND DAY OF SEPTEMBER, 2017.] SD/- SD/- ( PRAMOD KUMAR ) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 22/09/2017 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )*+ ,--. . /0 / DR, ITAT, AHMEDABAD 1 +23 / GUARD FILE. BY ORDER / . // . /0