2020 (3) TMI 1311 - HC - Income Tax

High Court upholds CIT(A) and Tribunal decisions, except for one project. Issues not substantial questions of law.

The High Court dismissed the appeal, affirming the concurrent findings of the CIT(A) and Tribunal, except for one project remanded for further ... Deduction u/s 80IB(10) denied - profit derived from sale of unutilized FSI not being the element of profits derived from the business activity of development and construction of the housing project relating to the sale of tenements - whether ITAT has erred in law and on facts in upholding the decision of Ld. CIT(A) in allowing the deduction u/s.80IB(10) ignoring the facts that in Pratham Residency, Pratham Vatika and Pratham Vistas, assessee has exploited the project land to the maximum keeping in view the various legal and regulatory impediments and the assessee firm had sufficient reasons for not being able to fully utilize the FSI in project? - whether only the profits which are derived from development and construction of housing units are eligible for benefit u/s.80IB(10) and not the profits which are attributable to the FSI that was sold as such without developing and constructing? - ITAT deleted the addition - HELD THAT:- Both the CIT(A) and the Tribunal have arrived at concurrent findings of fact except the project of 'Pratham Citadel'. After taking into consideration the special grounds and circumstances, the ratio of the decision in the case of Shreenath Infrastructure [2014 (4) TMI 482 - GUJARAT HIGH COURT]was applied for allowing the deduction claimed by the assessee under Section80IB(10) of the Act. In respect of the project 'Pratham Citadel', for which, the CIT(A) disallowed the claim of the assessee under Section80IB(10) of the Act, the deduction in respect of utilization of FSI, the Tribunal has restored the matter back to the file of Assessing Officer for deciding afresh for examination and verification of the details to be furnished by the assessee so as to consider whether there is any special reasons for underutilization of FSI as enunciated in the case of Shreenath Infrastructure [2014 (4) TMI 482 - GUJARAT HIGH COURT] When both the CIT(A) and the Tribunal have arrived at concurrent findings of fact on the basis of the material and records, none of the questions nos.2(d), (e) and (f) could be termed as substantial question of law. The appeal, therefore, fails and stands dismissed. Issues Involved:1. Eligibility for deduction under Section 80IB(10) of the Income Tax Act, 1961.2. Compliance with conditions prescribed for built-up area.3. Pro rata basis deduction under Section 80IB(10).4. Deduction on profit derived from the sale of unutilized FSI.5. Exploitation of project land and regulatory impediments.6. Profits derived from development and construction versus sale of FSI.Detailed Analysis:1. Eligibility for Deduction under Section 80IB(10) of the Income Tax Act, 1961:The Revenue questioned whether the assessee is eligible for deduction under Section 80IB(10) as the assessee obtained a single approval from the Local Authority for developing and constructing residential units exceeding 1500 sq.ft., violating the provisions of clause (c) of Section 80IB(10). The High Court referred to a similar case (Tax Appeal No.25 of 2020) where such questions were not admitted, and thus, these questions were not admitted in this case either.2. Compliance with Conditions Prescribed for Built-Up Area:The Revenue argued that the project 'Pratham Vistas' failed to comply with the built-up area condition of 1500 sq.ft. The High Court dismissed this question based on the precedent set in Tax Appeal No.25 of 2020, where similar issues were not admitted.3. Pro Rata Basis Deduction under Section 80IB(10):The Revenue contended that the ITAT erred in allowing deduction on a pro rata basis when no such provision exists. The High Court dismissed this question, referencing the non-admission of similar issues in Tax Appeal No.25 of 2020.4. Deduction on Profit Derived from Sale of Unutilized FSI:The Assessing Officer restricted the deduction under Section 80IB(10) for profits from the sale of unutilized FSI, disallowing Rs. 6,79,18,955/-. The CIT(A) allowed the appeal, citing the Gujarat High Court's decision in Shreenath Infrastructure, which acknowledged special grounds for underutilization of FSI. The Tribunal upheld the CIT(A)'s decision, noting that marginal underutilization does not disqualify the deduction if justified by special reasons.5. Exploitation of Project Land and Regulatory Impediments:The CIT(A) and Tribunal considered various factors affecting FSI utilization, such as high tension electric wires, odd-shaped plots, and regulatory restrictions. For projects like Pratham Residency, Pratham Vatika, and Pratham Vistas, the CIT(A) allowed deductions, recognizing that the underutilization was marginal and justified by specific impediments. However, for Pratham Citadel, where FSI utilization was significantly low (55%), the Tribunal remanded the issue to the Assessing Officer for further verification of special circumstances.6. Profits Derived from Development and Construction versus Sale of FSI:The Revenue argued that only profits from the development and construction of housing units are eligible for deduction, not those from the sale of FSI. The Tribunal, considering the special grounds for underutilization, upheld the CIT(A)'s decision for most projects but required further examination for Pratham Citadel.Conclusion:The High Court dismissed the appeal, affirming the concurrent findings of the CIT(A) and Tribunal, except for Pratham Citadel, which was remanded for further examination. The court concluded that none of the questions raised constituted substantial questions of law.