2019 (4) TMI 1850 - AT - Income Tax

Tribunal upholds deductions for projects with FSI underutilization

ACIT, DCIT, Cir. 2 (2), Baroda Versus M/s. Pratham Developers And Vice-Versa And M/s. Pratham Developers Versus Pr. CIT-1, Vadodara

ACIT, DCIT, Cir. 2 (2), Baroda Versus M/s. Pratham Developers And Vice-Versa And M/s. Pratham Developers Versus Pr. CIT-1, Vadodara - TMI Issues Involved:1. Deduction under Section 80IB(10) of the Income Tax Act.2. Ownership and approval of land for housing projects.3. Utilization of Floor Space Index (FSI) and its impact on deductions.4. Pro-rata basis deduction under Section 80IB(10).5. Revision of assessment under Section 263 of the Income Tax Act.6. Charging of interest under Section 234B of the Income Tax Act.Issue-wise Detailed Analysis:1. Deduction under Section 80IB(10) of the Income Tax Act:The primary issue revolves around the deduction claimed by the assessee under Section 80IB(10) for various housing projects. The Revenue challenged the deduction on the grounds that certain residential units exceeded the prescribed built-up area of 1500 sq. ft. The CIT(A) allowed the deduction by relying on the Gujarat High Court's decision in CIT vs. Radhe Developers, which held that ownership of land is not a prerequisite for claiming the deduction under Section 80IB(10). The Tribunal upheld the CIT(A)'s decision, stating that the assessee was entitled to the deduction as the residential units in question were part of a separate project developed by another entity, Pratham Properties.2. Ownership and Approval of Land for Housing Projects:The Revenue contended that the assessee was not the sole owner of the land on which the housing project was constructed, and the approval for the project was not in the name of the assessee. The Tribunal referred to the Gujarat High Court's decision in Radhe Developers, which clarified that ownership of land is not a condition for claiming deduction under Section 80IB(10). The Tribunal found that the assessee had developed the housing project and was entitled to the deduction.3. Utilization of Floor Space Index (FSI) and its Impact on Deductions:The Revenue argued that the assessee did not fully utilize the permissible FSI and claimed deduction on the profit earned from the sale of unutilized FSI. The CIT(A) allowed the deduction for projects where the underutilization of FSI was marginal, citing the Gujarat High Court's decision in Shreenath Infrastructure, which allowed deductions in cases of marginal underutilization due to special circumstances. The Tribunal upheld the CIT(A)'s decision, except for the Pratham Citadel project, where the underutilization was significantly high (45.30%).4. Pro-rata Basis Deduction under Section 80IB(10):The Revenue contended that there is no provision in the statute to grant deduction on a pro-rata basis. The Tribunal, while upholding the CIT(A)'s decision, noted that the CIT(A) had considered various judicial pronouncements that allowed proportionate deduction under Section 80IB(10) for units that met the eligibility conditions.5. Revision of Assessment under Section 263 of the Income Tax Act:The Principal Commissioner of Income Tax (PCIT) invoked Section 263 to revise the assessment, arguing that the Assessing Officer (AO) had not examined the issue of profitability from the sale of unutilized FSI. The Tribunal upheld the PCIT's order, stating that the AO's failure to examine this issue rendered the assessment order erroneous and prejudicial to the interests of the Revenue. The Tribunal directed the AO to re-examine the issue in light of the Gujarat High Court's decisions in Moon Star Developers and Shreenath Infrastructure.6. Charging of Interest under Section 234B of the Income Tax Act:The assessee challenged the charging of interest under Section 234B. The Tribunal dismissed this ground, stating that charging of interest under Section 234B is mandatory as per the provisions of the Act.Conclusion:The Tribunal dismissed the Revenue's appeals and partly allowed the assessee's appeals for statistical purposes. The Tribunal upheld the CIT(A)'s decisions on various grounds, including the allowance of deduction under Section 80IB(10) for projects with marginal underutilization of FSI and the proportionate deduction for eligible units. The Tribunal also upheld the PCIT's order under Section 263, directing the AO to re-examine the issue of profitability from the sale of unutilized FSI. The Tribunal dismissed the assessee's ground on the charging of interest under Section 234B.