Assessee's FSI sale profit qualifies for deduction under Section 80IB(10)

The Tribunal allowed the assessee's claim for deduction under Section 80IB(10), determining that the profit from the sale of Floor Space Index (FSI) was derived from the housing project and eligible for deduction. The objections raised by the Assessing Officer and CIT(A) were deemed meritless, and the appeal of the assessee was granted.

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Issues Involved:
1. Decline of claim of deduction under Section 80IB(10) of the Income Tax Act.
2. Profit derived from sale of unutilized Floor Space Index (FSI) and its eligibility for deduction under Section 80IB(10).
3. Alleged violation of Section 80IB(10)(iii)(c) due to sale of FSI in excess of 1000 sq. ft.
4. Allegation of sale of FSI to closely related parties at inflated rates.

Issue-wise Detailed Analysis:

1. Decline of claim of deduction under Section 80IB(10) of the Income Tax Act:
The assessee, engaged in real estate development, claimed a deduction under Section 80IB(10) for the assessment year 2012-13. The Assessing Officer (AO) declined this claim, arguing that the profit was derived from the sale of unutilized FSI, not from the housing project. The AO relied on the Supreme Court judgment in Liberty India vs. CIT and the Gujarat High Court judgment in CIT vs. Moon Star Developers to support this decision. The CIT(A) upheld the AO's decision, stating that the profit was attributable to the sale of unutilized FSI and not derived from the housing project.

2. Profit derived from sale of unutilized FSI and its eligibility for deduction under Section 80IB(10):
The assessee argued that the profit from the sale of unutilized FSI was eligible for deduction under Section 80IB(10). The assessee cited several judicial pronouncements, including ITO v. M/s. Suraksha Realtors and CIT v. Sonasha Enterprises, to support this claim. The Tribunal noted that the FSI was received as consideration for constructing rehabilitation buildings under the Slum Rehabilitation Scheme. The FSI could be used for construction or sold as TDR. The Tribunal concluded that the profit from the sale of FSI qualified for deduction under Section 80IB(10), as it was derived from the housing project.

3. Alleged violation of Section 80IB(10)(iii)(c) due to sale of FSI in excess of 1000 sq. ft:
The AO argued that the sale of FSI to each person exceeded 1000 sq. ft, violating Section 80IB(10)(iii)(c). The Tribunal found this objection misconceived, noting that the limitation on the area of constructed tenements prescribed in Section 80IB(10)(iii)(c) pertains to residential units, not the sale of FSI. The tenements constructed were below the statutory ceiling of 250 sq. ft, and the AO had mistaken the area of FSI sold for the area of the constructed tenements.

4. Allegation of sale of FSI to closely related parties at inflated rates:
The AO alleged that the FSI was sold to closely related parties at inflated rates to defraud the revenue. The Tribunal examined the sales and found that the parties were not closely related to the assessee. The sales were at arm's length, with rates comparable to those for independent and unrelated parties. The Tribunal also noted that the stamp duty rate applied by the AO was not conclusive but indicative, and the charge of inflated sale was contrary to the facts on record.

Conclusion:
The Tribunal directed the AO to allow the assessee's claim for deduction under Section 80IB(10), concluding that the profit from the sale of FSI was derived from the housing project and eligible for deduction. The objections raised by the AO and CIT(A) were found to be without merit. The appeal of the assessee was allowed.

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