Section 80IB(10) deductions and unutilised FSI: project-specific constraints, separate-project treatment, and revision upheld for unexamined FSI profit.

Section 80IB(10) was discussed in relation to whether land ownership is a statutory condition, whether proportionate deduction can be denied because some units allegedly exceeded the built-up area limit, and how project-specific constraints affect unutilised FSI. The Tribunal accepted that land ownership alone does not defeat the claim where the assessee is the developer, treated the relevant residential units as eligible where the projects were distinct, and upheld deduction where layout and site constraints justified lower FSI utilisation. It remanded one project for fresh verification because the underutilisation appeared substantial. On section 263, revision was sustained because the assessment had not examined the taxability of profit from sale of unutilised FSI.

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Issues: (i) whether deduction under section 80IB(10) could be denied on the ground that the assessee was not the sole owner of the land, that some units exceeded the prescribed built-up area, or that deduction could not be granted on a pro rata basis; (ii) whether deduction under section 80IB(10) could be disallowed for profit relatable to unutilized FSI where the assessee showed special constraints affecting utilization; (iii) whether the revision under section 263 was justified for alleged non-examination of the issue of profit from sale of unutilized FSI.

Issue (i): whether deduction under section 80IB(10) could be denied on the ground that the assessee was not the sole owner of the land, that some units exceeded the prescribed built-up area, or that deduction could not be granted on a pro rata basis.

Analysis: The assessee's claim was tested against the scheme of section 80IB(10) and the jurisdictional principle that ownership of land is not a statutory condition precedent if the assessee is otherwise the developer of the housing project. The Tribunal accepted the finding that the 55 units referred to by the Revenue belonged to a separate project developed by another concern and, therefore, did not form part of the eligible project. On that basis, the residential units in the relevant project that satisfied the prescribed built-up area condition were held eligible. The Revenue's contention that proportionate relief was impermissible did not survive once the projects were found to be distinct.

Conclusion: Deduction under section 80IB(10) was upheld in favour of the assessee for the eligible project units, and the Revenue's challenge on ownership, separate project, and pro rata denial failed.

Issue (ii): whether deduction under section 80IB(10) could be disallowed for profit relatable to unutilized FSI where the assessee showed special constraints affecting utilization.

Analysis: The Tribunal applied the principle that section 80IB(10) does not require full utilization of FSI in every case, but the claim must be examined project-wise and in light of the actual reasons for underutilization. For Pratham Residency, Pratham Vatika and Pratham Vistas, the Tribunal accepted the factual explanation that layout restrictions, road margins, odd shapes of plots, public-road constraints and a high-tension line prevented full utilization, and it found no infirmity in the CIT(A)'s allowance of deduction. For Pratham Citadel, however, the underutilization was found to be substantially higher and the matter required fresh verification of the stated special circumstances, so the issue was restored to the Assessing Officer for reconsideration.

Conclusion: Deduction was sustained for the projects where special grounds for underutilization of FSI were accepted, while the Pratham Citadel issue was remanded for fresh examination.

Issue (iii): whether the revision under section 263 was justified for alleged non-examination of the issue of profit from sale of unutilized FSI.

Analysis: The Tribunal noted that the assessment record did not show examination of the specific issue of taxability of profit from sale of unutilized FSI. Since the assessee's detailed material on that aspect had not been properly examined during the original assessment, the Principal Commissioner was justified in invoking revisionary jurisdiction to set aside the assessment on this limited point for fresh adjudication after giving the assessee an opportunity of hearing.

Conclusion: The revision under section 263 was upheld and the assessee's challenge failed.

Final Conclusion: The Revenue's appeals were dismissed, the assessee obtained substantial relief on the section 80IB(10) claims for the projects accepted as eligible, the Pratham Citadel FSI issue was remanded, and the revisionary order under section 263 was sustained.

Ratio Decidendi: For deduction under section 80IB(10), land ownership is not by itself a disqualifying condition, and marginal underutilization of FSI supported by special project-specific constraints does not automatically defeat the claim, but substantial underutilization or unexamined FSI-related profit may require fresh scrutiny on the facts of each project.

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