TaxTMI 
TaxTMI 
2017 (1) TMI 768
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....struction activities undertaken under the said Scheme could either be utilized for construction of sale buildings on situ (on the same plot), or sold in open market as such, or in the form of Transferable Development Rights ('TDR' in short). During the year under consideration, the assessee had claimed deduction u/s, 80- IB(10) of the act which was arrived at after reducing the cost involved in the construction of rehabilitation buildings from the consideration received for the FSI granted by the State and which was sold to third parties as permitted under the said scheme. However, AO declined assessee's claim of deduction on the plea that the profit claimed as deduction u/s 80-IB(10) of the Act was not derived from the housing project but from sale of unutilized FSI. For arriving at his conclusion the AO has relied upon the judgment of Hon'ble Supreme Court in the case of Liberty India vs. CIT (317 ITR 218) and Hon'ble Gujarat High Court in the case of CIT vs. Moon Star Developers (367 ITR 621). 5. The AO further observed that since the FSI sold formed part of the project under development, the project could not be said to be completed and, therefore, deduction u/s. 80-IB(10)....
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....y were distinguishable. 11. We have considered rival contentions and carefully gone through the orders of the authorities below and material placed before us. We had also deliberated on the judicial pronouncements referred by lower authorizes in their respective orders as well as cited by learned AR and DR during the course of hearing before us in the context of factual matrix of the case. From the record we found that the assessee was awarded a slum rehabilitation project on C.S. No. 47 (Pt.) of Lower Parel Division of Keshavrao Khade Marg, identified as Rajiv Nagar CHS by the Slum Rehabilitation Authority ('SRA' in short) in 2004 for which Letter of Intent ('LOI'in short) was issued by the Executive Engineer vide No. SRA/Ch. E/10/GS/ML/LOI dated 16.09.2004 under D.C. Regulation No. 33(10) ['DCR 33(10)' in short] and Appendix-IV of amended D.C. Regulations granting 2.58 FSI out of which maximum FSI of 1.66 could be consumed on the plot subject to the terms and conditions stipulated therein. The LOI originally issued was subsequently amended, and a revised one sanctioning FSI of 2.636, out of which FSI of 2.41 could be consumed on the plot, was issued on 06.12.2010....
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....rted out of India are to be brought into homeland in convertible foreign exchange. Accordingly, the objection against the claim that the profit under consideration was not derived from the housing project was misplaced. 13. Exactly similar issue has been considered by Co-ordinate Bench in case of Suraksha Realtors in I.T.A.No.4223/Mum/2010 vide order dated 21/10/2011 and observed as under:- The Assessee partnership firm, M/S. Suraksha Realtors, is engaged in development of buildings and residential houses. The firm had undertaken one such construction activity of construction of 343 residential tenements on a plot of land situated at plot - A, Survey No.57, CTS NO.251 A, Village Anik, Chembur, Mumbai, incidentally such housing project was a slum related project. The housing project was developed on a plot of land admeasuring 4550.67 sq. meters (1.13 acre) i.e. on a plot of land admeasuring over 1 acre. All the tenements constructed were of an area at 225 sq. ft. carpet area (about 270 sq. ft. of built up area) which were less than 1000 sq.ft. per tenement. Such tenements were constructed in four buildings and all the tenements were handed over to the Slum Re-development Authorit....
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.... TDR was received as sale consideration and and hence the value of the TDR or the amount realised from the sale of the TDR is nothing but sale consideration received / receivable for development of the tenements. It is income directly derived from the sale of tenements. Such TDR were not attributable, to such sale. The issue is whether income earned on sale of TDR was a direct income on sale of the 355 tenements and whether such income was derived from the housing project or not. The AO has on relying on three Supreme Court judgments concluded that the income earned by the Assessee was incidental and ancillary and such income shall not be eligible for the claim of deduction u/s 80lB(10). In all those cases the exporter had received export incentives from the Government. The exporter has sold their goods and realised consideration for the sale of goods. This has been accepted as income derived from exports. However the Government had formulated schemes for giving incentives to exporters. These incentives does not accrue or arise from sale and export of the goods. It arises from the assessee being the exporter In the circumstances the Apex Court held that the incentives are not dir....
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....tablishment. Thus, when the TDR received by the assessee was immediately sold and the sale consideration was shown as receipt from the housing project, then, there is no other element in the said receipt against the sale of TDR other than the income from housing project." 16. Above order of the Tribunal was followed by ITAT 'E' Bench in assessee's own case for the assessment year 2009-10 in ITAT No.5292/M/2011 vide order dated 08/06/2012. 17. ITAT 'G' Bench in case of Akruti City Limited vide order dated 21/10/2011 has considered the same issue with regard to allowability of Section 80IB(10) deduction in respect of sale proceed of FSI and held that profit arising from sale of FSI was allowable for exemption u/s.80IB(10). 18. Now coming to the decision relied on by CIT(A) in the case of Moon Star Developers (367 ITR 621), wherein Hon'ble High Court found that assessee was earning because of purchase and sale of land and not because of the construction carried out in the weaker section of the society which is a legislative intention behind Section 80IB(10). Moreover in that case, the income from sale of unit was independent of the income from sale of unutilized FSI. In this case t....
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....enements to the Slum Rehabilitation Authorities free of cost. In the case of Moon Star Developers, consideration was received in the form of cash / cheque where as in the case of assessee, the consideration was by way of FSI after handing over constructed tenements to the Slum Rehabilitation Authorities. 20. Since the judgment of the Hon'ble Gujarat High Court in CIT v. Moon Star Developers (367 ITR 621) in which the ratio laid down in Liberty India v CIT (317 ITR 218 SC) was relied upon for the revenue was distinguished and shown to be inapplicable to the facts of the case, the attempt of AO to take support from that apex Court judgment was devoid of merit. Thus, the orders of the Hon'ble Tribunal are squarely applicable to the facts of the case of the assessee and the fact that there the profits arose out of sale of TDR was not a distinguishable feature. Conceptually, there is no difference between the Transferable Development Rights (TDR) and Floor Space Index (FSI). Both represent permissible construction area. The only difference between the two is while TDR can be transferred from one project/piece of land to another, FSI has to be used in situ, i.e. on the same piece of lan....
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....rd to the above, we found that the said Notification was followed by a corrigendum dated 05.01.2011, a copy of which was placed on page 43 of PB No. I, by which the effective date of the first notification was made as '01.04.2004' in place of 03.08.2010. Thus, the aforesaid objection raised by the CIT (A) in ignorance of the corrigendum Notification No. 67/2010 dated 05.01.2011 is not tenable. Thus, the CIT(A) by placing reliance on an incorrect notification erroneously concluded so, once the aforesaid corrigendum notification is applicable, as per proviso to S. 80-IB(10)(b) of the Act, clause (a) directing completion of the project within four years from the date of approval, and clause (b) stipulating the area of the land on which the tenements are constructed would not be applicable. Since the project was approved on 16.09.2004, i.e. prior to 01.04.2005 the case of the assessee was covered by the judgment of the Hon'ble Supreme Court in the case of CIT v. Sarkar Builders (375 ITR 392). 24. Now coming to the objection of the AO to the effect that FSI sold to each of the person was in excess of 1000 sq.ft which was in violation of Section 80IB(10)(iii)(c) of the Act, ....
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....e found that all the sales were at 'arm's length'. The rates at which FSI were sold to Smt. Kantarani Gulati and Shri Hafeez Contractor, who were independent and unrelated parties, were Rs. 82,364/- (incorrectly mentioned by the Assessing Officer as Rs. 67,545/-) and Rs. 72,874/- respectively, as against Rs. 85,437/- to Shri Rushank Shah having 5% shareholding. In so far as Smt. Kunjal Shah and Smt. Falguni Shah having 1.91% and 2.38% stakes respectively through M/s. Hubtown Limited, it was sold at Rs. 83,552/- and Rs. 83,543/- respectively. In view of these comparison the inference drawn by the Assessing Officer that the FSI sold was at inflated rates was contrary to his own record. 27. We further observe that stamp duty rate applied by the AO was not conclusive but at the most indicative. Even S.50C of the Act permits valuation by DVO which itself was an indicator that stamp duty rate was not conclusive and in support of this contention reliance can be placed upon the order of the Hon'ble Tribunal in the case of group concern M/s. Ackruti City Ltd v. DCIT in ITA Nos. 4875 and 4813/Mum/2009 dated 21.10.2011, which has attained finality. Thus, the charge of inflated sale was c....