AHMEDABAD, JULY 31, 2014: THE issue before the Bench is - Whether profit relatable to the sale of unutilized FSI is also eligible for Sec 80IB(10) benefits. NO is the HC's answer.
Facts of the case
The assessee, a builder and developer of real estate, filed e-return declaring income after claiming deduction under section 80IB(10). The total income was declared as Rs. NIL. During the assessment proceedings, it was found that the assessee firm had carried out construction activity on a land without fully utilizing the permissible floor space index (FSI). It was found that the assessee had total plot area of 10539.69 sq. mtrs. for development, after reduction on account of common plot and roads etc. It was further found that the assessee was eligible to construct super build up area of 16863.5 sq. mtrs. @ 1.6 FSI. It was found that the assessee had constructed the housing project by deploying construction of 3665.39 sq.mtrs. of FSI. It was found that thus, the FSI of 5864.62 sq. mtrs. came to be utilized for the construction of the same, out of permissible FSI of 16863.5 sq. mtrs. It was found by the AO that the profit ensuring from the entire project for the year as per the profit and loss account, included additional profit attributable to sale of unutilized FSI had also been booked by the assessee firm. Therefore, the AO observed and held that since the eligible profit for claim of deduction u/s 80IB(10) can only relate to those from the project of development and construction, the profit attributable to the sale of untilized FSI not relating to development and construction undertaken shall not become eligible for the said claim. Consequently, the AO disallowed Rs. 32,81,410/- claimed under sec. 80IB(10) of the Act being profit under untilized sale of FSI of project in housing units. The AO also disallowed Rs. 22,44,480/- claimed under sec. 40(a)(ia) of the Act.
In appeal, CIT(A) deleted the disallowance made by the AO. In further appeal, Tribunal confirmed the order passed by the CIT(A).
Revenue submitted that as such the question involved in the present Tax Appeal was now not res integra in view of the recent decision of the Division Bench of this Court dated 5 & 11/03/2014 passed in Tax Appeal No. 549/2008 and other allied Tax Appeals, in which it was held that the profit relatable to the sale of unutilized FSI would not be eligible for deduction under section 80IB(10) of the Act.
Assessee requested to remand the matter to the A.O. to consider the exact unutilized FSI and exact calculation with respect to the unutilized FSI.
Having heard the parties, the Court held that,
++ the question, which is posed for consideration of this Court is, whether on the facts and in the circumstances of the case and in law, the ITAT was right in law in allowing deduction u/s80IB(10) r.w.s. 80IB(1) to the assessee on profit derived from sale of unutilized FSI without appreciating that the said profit is not eligible for deduction u/s. 80IB(10)r.w.s. 80IB(1) as it has not been derived by the assessee from the business activity of development and construction of a housing project. The aforesaid substantial question of law is now not res integra in view of the recent decision of this court rendered in Tax Appeal No. 549 of 2008 and other allied Tax Appeals. In the aforesaid decision, the Division Bench of this Court has specifically observed and held that the profit relatable to the sale of unutilized FSI would not be eligible for deduction under sec. 80IB(10) of the Act;
++ in view of the aforesaid decision of coordinate Bench of this Court in Tax Appeal No. 549 of 2008 with other allied Tax Appeals, the substantial question of law raised in the present appeal is to be answered in favour of the revenue and against the assessee;
++ so far as request made by Mr. Soparkar on behalf of assessee relying upon the decision of the Division Bench this court in the case of Shreenath Infrastructure and to remand the matter to the AO to calculate the exact unutilized FSI is concerned, in the facts and circumstances of the case, the aforesaid cannot be accepted. At the out-set, it is required to be noted that in the assessment order on the basis of the material on record, the AO has given full particulars and details with respect to the total permissible FSI available for construction; the FSI utilized and the FSI unutilized by the assessee;
++ finding recorded by the AO is on appreciation of evidence and the same has never been disputed by the assessee. Under the circumstances, when the aforesaid factual aspect with respect to the total permissible FSI available for construction; the FSI utilized by the assessee and the FSI unutilized by the assessee is available on record, there is no question to remand the matter to the AO for the aforesaid question.
The assessee, a builder and developer of real estate, filed e-return declaring income after claiming deduction under section 80IB(10). The total income was declared as Rs. NIL. During the assessment proceedings, it was found that the assessee firm had carried out construction activity on a land without fully utilizing the permissible floor space index (FSI). It was found that the assessee had total plot area of 10539.69 sq. mtrs. for development, after reduction on account of common plot and roads etc. It was further found that the assessee was eligible to construct super build up area of 16863.5 sq. mtrs. @ 1.6 FSI. It was found that the assessee had constructed the housing project by deploying construction of 3665.39 sq.mtrs. of FSI. It was found that thus, the FSI of 5864.62 sq. mtrs. came to be utilized for the construction of the same, out of permissible FSI of 16863.5 sq. mtrs. It was found by the AO that the profit ensuring from the entire project for the year as per the profit and loss account, included additional profit attributable to sale of unutilized FSI had also been booked by the assessee firm. Therefore, the AO observed and held that since the eligible profit for claim of deduction u/s 80IB(10) can only relate to those from the project of development and construction, the profit attributable to the sale of untilized FSI not relating to development and construction undertaken shall not become eligible for the said claim. Consequently, the AO disallowed Rs. 32,81,410/- claimed under sec. 80IB(10) of the Act being profit under untilized sale of FSI of project in housing units. The AO also disallowed Rs. 22,44,480/- claimed under sec. 40(a)(ia) of the Act.
In appeal, CIT(A) deleted the disallowance made by the AO. In further appeal, Tribunal confirmed the order passed by the CIT(A).
Revenue submitted that as such the question involved in the present Tax Appeal was now not res integra in view of the recent decision of the Division Bench of this Court dated 5 & 11/03/2014 passed in Tax Appeal No. 549/2008 and other allied Tax Appeals, in which it was held that the profit relatable to the sale of unutilized FSI would not be eligible for deduction under section 80IB(10) of the Act.
Assessee requested to remand the matter to the A.O. to consider the exact unutilized FSI and exact calculation with respect to the unutilized FSI.
Having heard the parties, the Court held that,
++ the question, which is posed for consideration of this Court is, whether on the facts and in the circumstances of the case and in law, the ITAT was right in law in allowing deduction u/s80IB(10) r.w.s. 80IB(1) to the assessee on profit derived from sale of unutilized FSI without appreciating that the said profit is not eligible for deduction u/s. 80IB(10)r.w.s. 80IB(1) as it has not been derived by the assessee from the business activity of development and construction of a housing project. The aforesaid substantial question of law is now not res integra in view of the recent decision of this court rendered in Tax Appeal No. 549 of 2008 and other allied Tax Appeals. In the aforesaid decision, the Division Bench of this Court has specifically observed and held that the profit relatable to the sale of unutilized FSI would not be eligible for deduction under sec. 80IB(10) of the Act;
++ in view of the aforesaid decision of coordinate Bench of this Court in Tax Appeal No. 549 of 2008 with other allied Tax Appeals, the substantial question of law raised in the present appeal is to be answered in favour of the revenue and against the assessee;
++ so far as request made by Mr. Soparkar on behalf of assessee relying upon the decision of the Division Bench this court in the case of Shreenath Infrastructure and to remand the matter to the AO to calculate the exact unutilized FSI is concerned, in the facts and circumstances of the case, the aforesaid cannot be accepted. At the out-set, it is required to be noted that in the assessment order on the basis of the material on record, the AO has given full particulars and details with respect to the total permissible FSI available for construction; the FSI utilized and the FSI unutilized by the assessee;
++ finding recorded by the AO is on appreciation of evidence and the same has never been disputed by the assessee. Under the circumstances, when the aforesaid factual aspect with respect to the total permissible FSI available for construction; the FSI utilized by the assessee and the FSI unutilized by the assessee is available on record, there is no question to remand the matter to the AO for the aforesaid question.
Regards
Prarthana Jalan
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