TaxTMI 
TaxTMI 
2020 (3) TMI 1311
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the Income Tax Act, 1961 without appreciating that the assessee is not eligible for deduction u/s.80IB(10) of the Act as the assessee had obtained the single approval from Local Authority consisting of approval for development and construction of residential unit having area of more than 1500 sq.ft. which is in violation of provisions of clause (c) of section 80IB(10) of the Act? (b) Whether in the facts and circumstances of the case, the learned ITAT has erred in law and on facts in allowing deduction u/s.80IB(10) of the Act by holding that the project of the assessee "Pratham Vistas" compiles with the conditions prescribed for built up area of 1500 sq.ft. whereas the actual fact shows is that the assessee has failed to fulfil the essential condition of not constructing residential units exceeding 1500 sq.ft.? (c) Whether in the facts and circumstances of the case, the learned ITAT has erred in law and on facts in upholding the decision of the learned CIT(A) allowing deduction u/s.80IB(10) of the Income Tax Act, 1961 to the assessee on a pro rate basis when there is no such provision under the statute permitting the same? (d) Whether in the facts and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he CIT(A) relying upon the decision of this Court in the case of Shreenath Infrastructure (2014) Taxman 461 (Guj.) allowed the appeal of the assessee. The relevant findings arrived at by the CIT(A) read thus:- 4.3.1 I have considered the submissions made by the Authorized representative and have gone through the orders of CIT (A)II, Baroda for A.Y.2006-07, the order of the Hon'ble ITAT, Ahmedabad in ITA No.2183/Ahd/2010 & ITA No.3300/Ahd/2009 for A.Ys.2006-07 & 2007-08. From the order of the Hon'ble ITAT, Ahmedabad, I find that they have followed the decision of Hon'ble Coordinate Bench in the case of Radhe Developers & Ors. V. ITO & Ors. (2008) 113 TTJ 300 (Ahd.) and dismissed the revenue's appeal. However, subsequent to the decision of ITAT, Ahmedabad in the case of Radhe Developers & Ors. (supra), Hon'ble High Court of Gujarat in the case of CIT1 V. Moon Star Developers [2014] 367 ITR 621 (Guj.) have considered the decision of Radhe Developers & Ors. (supra) and have given the following findings: ".....However, in cases where the utilization of FSI is way short of the permissible area of construction, looking to the scheme of Sectio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....even marginal underutilization of FSI would not be hit by disallowance of deduction under Section80IB of the Act." (Emphasis supplied) 4.3.3. The Ld. Authorized Representative has drawn my attention to the various factors which a Developer keeps in mind while demarking, designing and laying out plot of land in a housing project. In his written submission it is stated: "Your honour will appreciate that when a developer demarcates a plot of land for housing projects, the following issues are always kept in mind: a. There is a standardized design for the housing unit with almost all the houses having a standard ground floor (built up) area. b. The developer has to meet the regulations for common plot-generally 10% of the land area with restrictions on dimensions (Minimum size of the common plot shall be 250 sq.mts. with no side less than 10.50 meters.) and road width (7.5 meters). The arrangement of ownership tenement in a plot, shall be as may be approved by the Authority with due regard to internal approach roads, marginal open spaces common plot, water supply, drainage, and internal road lighting. c. Where the land is evenly sha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....honour scheme wise details and the various reasons as to why FSI could not be utilized in full. It was brought to your honour's kind notice that there were various impediments and limiting factors such as passing of high tension electric line, naliya road, odd sahpe of the plots and various construction restrictions by regulators etc. and we had demonstrated before your honour scheme wise reasons in respect of the utilization of FSI. These have no been tabulated to show the details of the plot wise variation and their effect on the overall project. Your Honour will appreciate from the charts in respect of the various schemes viz. Pratham Residency, Pratham Citadel, Pratham Vatika Ahmedabad and Pratham Vistas regarding the loss in constructible area on account of the various factors stated. In the said charts, the plot wise details are furnished and from which a deduction on account of the impediments stated is mad. A summary of the variations is given at the end of the charts. Your Honour will kindly observe the following from the enclosed charts:" The project wise analysis of available FSI visavis utilized FSI is discussed in below para:A. A. Pratham Residenc....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... A part of plots 196 & 197 will be pruned as there is a proposed residential scheme for EWS category of people on the adjacent plot and there is straightening of the boundaries. Subsequently, Town Planning Scheme was announced and certain portion of the plot were cut. This has affected many plots in the scheme. 6.2 In addition to this, the Authorized Representative has brought on record detailed explanation as to why full utilization of FSI was not possible on as many as fifty four plots because of their odd shapes, being corner plots, because of disputes with adjacent land owner and the necessary margins on account of the roads. The Authorized Representative has also furnished pot wise and project-wise summary of plot size, special reasons for underutilization of FSI as enunciated in the case of Shreenath Infrastructure (supra). This summary is placed as Annexure 'A' of the paper-book and from that it transpires that Gross FSI available with the appellant is 48614 Sqm, whereas, total 3427 Sqm is to be reduced considering special reasons forcing underutilization of FSI and this included town planning restriction, irregular shape of particular plots and disputes wi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aid section as claimed by the appellant 32279.28 square meters, i.e. utilization is 75% of the available FSI. Your honour will kindly appreciate that the underutilization was in the marginal range of 25% to 30%. The judgment of the Hon. Gujarat High Court in the case of Shreenath Developers would apply to the facts of this project and therefore, the marginal under utilization would not be hit by disallowance of deduction u/s.80IB(10) of the Act." B. Pratham Vatika (Ahmedabad): 7.1 Ld. Authorized Representative has submitted that Pratham Vatika (Ahmedabad) project is constructed on land at Block Nos.801 & 804 of Village Ghuma, Daskroi which was situated within the Ahmedabad Urban Development Area. The project consists of 100 units on a total plot area of 18792.99 square meters and according to the AUDA (Ahmedabad Urban Development Authority) provision, a 12 meter by road is required across the entire project as main road. Authorized Representative has further contended that from the enclosed brochure, it can be seen that the project is constructed on 2 plots which are joined by narrow strip of 31.5 meter, therefore, according to the road regulation, after ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to 17842.55 square meters as against this the actual utilization of FSI in Pratham Vatika Ahmedabad project is 13588.04 square meters, i.e. utilization is 76% of the available FSI. Your honour will kindly appreciate that the underutilization was in the marginal range of 25% to 30%. The judgment of the Hon. Gujarat High Court in the case of Shreenath Developers would apply to the facts of this project and therefore, the marginal underutilization would not be hit by disallowance of deduction u/s.808(10) of the Act." 7.4 In view of the various reasons cited and the explanations given above, I agree with the AR that the Appellant had exploited the project land to the maximum keeping in mind the various legal and regulatory impediments and that the Appellant had sufficient reasons for not being able to fully utilize the FSI in the project. Hon'ble Gujarat High Court in the case of Moon Star Developers (supra) has considered utilization of FSI up to 65% as reasonable. However, later on Hon'ble Gujarat High Court in the case of Shreenath Infrastructure (supra) has allowed deduction due to special reasons for underutilization of FSI and after considering the same ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... possible without flouting the margin requirements. Thus, Ld. Authorized Representative has brought on record detailed explanations as to why full utilization of FSI was not possible in this project. The Authorized Representative has also furnished plot wise and projectwise summary of plot sixe, special reasons for underutilization of FSI as enunciated in the case of Shreenath Infrastructure (supra). This summary is placed as Annexure 'C' of the paper book and from that it transpires that Gross FSI available with the appellant is 23,625 Sqm, whereas, total 2,165 Sqm is to be reduced considering special reasons forcing underutilization of FSI and this included town planning restriction, irregular shape or particular plots and naliya road. Considering these special reasons, available FSI remains 20,161 Sqm, whereas, FSI utilized in this project is 14,071 Sqm. This is tabulated by the appellant as under: "As against the total plot area of 14765.75 square meters the variation in respect of the plots which are covered by the reasons for under utilization is 2164.95 square meters which leaves balance plot area of 12600.80 square meters. The FSI available on the same work....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion in clause 4 under special condition which states as under (fair translation):- "Clause 4: This land is included in the Town Planning Scheme and accordingly construction of plot numbers C14, B-32 to 34, C-65 and D-66 are located outside the final plot. The construction of the said building can be commenced only after the receipt of the possession of the final plot and for the purpose necessary renewal/revised permission shall have to be obtained." It was also explained that there was a dispute as to the ownership of land demarcated for plots 32 to 34 and land adjacent to plot 43 and no construction was possible. 9.2 It was also stated that vide letter dated 29.12.2012, the Town Planning Officer (TPO) has intimated that the original final plot of 14805 square meters has been reduced to 14061 square meters. 9.3 Similarly, during the course of the hearing, it was explained to me that the entire row of houses on the northern side of the project was facing a public road with higher margin requirements. It was also pointed out that the northern and southern sides of the project land were not parallel resulting in an odd shape which necessitated lea....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o unutilized FSI in respect of Pratham Citadel project of the Appellant at Rs. 10,07,054/for the entire project. The Authorized Representative has contended that in view of above mentioned facts, the profit attributable to unutilized FSI in respect of Pratham Citadel Project has to be restricted to 54 plots and the disallowance in respect of the profit attributable to unutilized FSI for Pratham Citadel Project be calculated as under:- No. of Units Land Area Sqm FSI Sqm Total Project 66 11163 17745 Less: 12 2545 4073 54 8618 13672 As against the FSI available of 13,672 Sqm, the appellant has utilized FSI of 7,479 Sqm, therefore, underutilization of FSI is worked out at 6,193 Sqm i.e. 30%]. However, during the appeal before me Ld. Authorized Representative has made further submission as under: "As against the total plot area of 11162.54 square meters the variation in respect of the plots which are covered by the reasons for under utilization is 750.98 square meters which leaves balance plot area of 10411.56 square meters. The FSI available on the same works out to 16658.50 square meters as against this th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t is true that section 80IB(10) of the Act does not provide that for deduction, the undertaking must utilize 100% of the FSI available. The question however is, can an undertaking utilize only a small portion of the available area for construction, sell the property leaving ample scope for the purchaser to carry on further construction on his own and claim full deduction under section 80IB(10) of the Act on the profit earned on sale of the property? If this concept is accepted, in a given case, an assessee may put up construction of only 100 sq.ft. on the entire area of one acre of plot and sell the same to a single purchaser and claim full deduction on the profit arising out of such sale under section 80IB(10) of the Act. Surely, this cannot be stated to be development of a housing project qualifying for deduction under section 80IB(10) of the Act. This is not to suffest that for claiming deduction under section 80IB(1) of the Act, in variably in all cases, the assessee must utilize the full FSI and any shortage in such utilization would invite wrath of the claim under section 80IB(10) being rejected. The question is where does one draw the line. In our opinion, the issue has to b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tika, Pratham Vistas and Pratham Shrusti except Pratham Citadel are also allowed as per the ground of appeal of the assessee vide ITA No.3086/Ahd/2016 for assessment year 2010-11. 14. In respect of project Pratham Citadel on which the ld. CIT(A) has disallowed the claim of the assessee u/s.80IB(10) deduction in respect of utilization of FSI, we observe that in this case the assessee has shown very less area of utilization of FSI. It is noticed that total unutilization of FSI was worked out at 45.30% which was quite high therefore the ld. CIT(A) has disallowed the claim of the assessee. In this connection, the assessee has contended that special circumstances for unutilization was not considered and no specific findings on the same was given as laid down in the decision of Shreenath Developer of Gujarat High Court. We observe that assessing officer and CIT(A) has not controverted the special circumstances/grounds for less utilization of FSI as mentioned on page 65 to 66 on the order of the ld. CIT(A) as per the findings of the Hon'ble High Court of Gujarat given in the above cited judgment. In the light of the above facts and findings, we are of the view that it will be....