Appellate Tribunal (‘The Tribunal’ For Short). The Tribunal Ruled In Favour Of The Assessees. The Revenue Thereupon Filed Further Appeals Before The High Court. v. Radhe Developers, 341 Itr 403 (Guj.), This Court Dismissed The Revenue’s Appeals And Confirmed The View Of The Tribunal. We Would Take Note Of The Relevant Port

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 549 of 2008 With TAX APPEAL NO. 489 of 2009 With TAX APPEAL NO. 492 of 2009 With TAX APPEAL NO. 323 of 2009 With TAX APPEAL NO. 317 of 2009With With TAX APPEAL NO. 304 of 2009 With TAX APPEAL NO. 1711 of 2008 With TAX APPEAL NO. 1490 of 2008 With TAX APPEAL NO. 581 of 2008 With TAX APPEAL NO. 577 of 2008 With TAX APPEAL NO. 574 of 2008 With TAX APPEAL NO. 573 of 2008 With TAX APPEAL NO. 572 of 2008 With TAX APPEAL NO. 570 of 2008 With TAX APPEAL NO. 568 of 2008 With TAX APPEAL NO. 566 of 2008 With TAX APPEAL NO. 565 of 2008 With TAX APPEAL NO. 561 of 2008 O/TAXAP/549/2008 JUDGMENT With TAX APPEAL NO. 558 of 2008 With TAX APPEAL NO. 557 of 2008 With TAX APPEAL NO. 556 of 2008 With TAX APPEAL NO. 555 of 2008With With TAX APPEAL NO. 554 of 2008 With TAX APPEAL NO. 553 of 2008 With TAX APPEAL NO. 552 of 2008 With TAX APPEAL NO. 550 of 2008 With TAX APPEAL NO. 1709 of 2010 With TAX APPEAL NO. 1492 of 2010 With TAX APPEAL NO. 1156 of 2010 With TAX APPEAL NO. 1051 of 2010 With TAX APPEAL NO. 2228 of 2009With With TAX APPEAL NO. 1681 of 2009 With TAX APPEAL NO. 1424 of 2009 With TAX APPEAL NO. 1312 of 2009 With TAX APPEAL NO. 1311 of 2009 With TAX APPEAL NO. 1273 of 2009With With TAX APPEAL NO. 1272 of 2009 O/TAXAP/549/2008 JUDGMENT With TAX APPEAL NO. 1265 of 2009 With TAX APPEAL NO. 1229 of 2009With TAX APPEAL NO. 445 of 2009WithTAX APPEAL NO.495 OF 2009 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE AKIL KURESHI andHONOURABLE MS JUSTICE SONIA GOKANI ================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ?the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ?judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ?to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================ THE COMMISSIONER OF INCOME TAX-I....Appellant(s)VersusVersusMOON STAR DEVELPERS....Opponent(s) ================================================================ Appearance: MR MR BHATT with MRS MAUNA BHATT and MR KM PARIKH, ADVOCATES for the Appellant(s)MR SN SOPARKAR, SR. ADV. WITH MR B.S. SOPARKAR, ADVOCATES for O/TAXAP/549/2008 JUDGMENT the Opponent(s) ================================================================ CORAM: HONOURABLE MR.JUSTICE AKIL KURESHIandHONOURABLE MS JUSTICE SONIA GOKANI Date : 05 & 11/03/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) ================================================================ THE COMMISSIONER OF INCOME TAX-I....Appellant(s)VersusVersusMOON STAR DEVELPERS....Opponent(s) ================================================================ Appearance: MR MR BHATT with MRS MAUNA BHATT and MR KM PARIKH, ADVOCATES for the Appellant(s)MR SN SOPARKAR, SR. ADV. WITH MR B.S. SOPARKAR, ADVOCATES for O/TAXAP/549/2008 JUDGMENT the Opponent(s) ================================================================ CORAM: HONOURABLE MR.JUSTICE AKIL KURESHIandHONOURABLE MS JUSTICE SONIA GOKANI Date : 05 & 11/03/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1.In this group of appeals, two questions are raised by the Revenue for our consideration. The first issue is with respect to the claim of deduction by the respondents-assessees under section 80IB(10) of the Income Tax Act,1961 (‘the Act’ for short). The assessees are developers. They had developed housing projects fulfilling the conditions contained in section 80IB(10) of the Act and claimed deduction on the profits so earned from sale of such housing projects. The Revenue was of the opinion that the land on which the housing project was constructed was not owned by the assessees and the development permission by the local authority was given in the name of the land-owners and not the assessees. On such grounds, the Assessing Officer declined to grant the benefit of deduction under section 80IB(10) of the Act, instead treating the assessees as a works contractors. Such issues reached the Income Tax Appellate Tribunal (‘the Tribunal’ for short). The Tribunal ruled in favour of the assessees. The Revenue thereupon filed further appeals before the High Court. In the case of CIT v. Radhe Developers, 341 ITR 403 (Guj.), this Court dismissed the Revenue’s appeals and confirmed the view of the Tribunal. We would take note of the relevant portion of such judgment at a later stage. 2.The second issue also arises out of the assessees’ claim for deduction under section 80IB(10) of the Act. The Assessing Officer in addition to raising objection to the entire claim of the assessees for deduction under section 80IB(10) of the Act further noticed that the assessees had not utililzed the full extent of the Floor Space Index (FSI for short) of the land in question. After putting the assessees to notice and eliciting their response, the Assessing Officer, concluded that the profit which could be relatable to the sale of unutilized FSI cannot be stated to have been derived from the assessees activity of development and construction of a housing project. Proportionate profit, therefore, reflected in the assessees income from the sale of residential units was taken out from eligible deduction under section 80IB(10)of the Act. The O/TAXAP/549/2008 JUDGMENT Tribunal on this issue also ruled in favour of the assessees. The Revenue, therefore, raised this additional question in these appeals. In Tax Appeals Nos.549/08, 552/08, 553/08, 554/08, 556/08, 557/08, 558/08, 561/08, 565/08, 566/08, 568/08, 570/08, 572/08, 573/08, 574/08, 577/08, 581/08 though such issue arises, at the time of admission of the appeals, question relatable to this issue was not framed though it does arise out of respective judgment of the Tribunal. We therefore permit the Revenue to raise such additional question in such appeals. In other appeals, such an additional question has already been framed. For the purpose of all these appeals, therefore, we adopt the following common substantialquestionoflawforour consideration: Tribunal on this issue also ruled in favour of the assessees. The Revenue, therefore, raised this additional question in these appeals. In Tax Appeals Nos.549/08, 552/08, 553/08, 554/08, 556/08, 557/08, 558/08, 561/08, 565/08, 566/08, 568/08, 570/08, 572/08, 573/08, 574/08, 577/08, 581/08 though such issue arises, at the time of admission of the appeals, question relatable to this issue was not framed though it does arise out of respective judgment of the Tribunal. We therefore permit the Revenue to raise such additional question in such appeals. In other appeals, such an additional question has already been framed. For the purpose of all these appeals, therefore, we adopt the following common substantialquestionoflawforour consideration: “Whether in the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in law in holding that full deduction under section 80IB(10) of the Act was available to the assessees even though the construction was carried out only utilizing a portion of FSI available?” 3.We may first, deal with issue No.1 which is possible of summary disposal since the issue is already covered by a decision of this Court in the case of Radhe Developers (supra). Under identical circumstances, this Court upheld the assessees claim for deduction under section 80IB(10) of the Act making following observations: “31. Neither the provisions of Section 80IB nor any other provisions contained in other related statutes were brought to our notice to demonstrate that ownership of the land would be a condition precedent for developing the housing project. It was perhaps not even the case of the Revenue that under the other laws governing construction in urban and semi-urban areas, there was any such restriction. It is, however, the thrust of the argument of the Revenue that in order to receive benefit under Section 80IB(10) of the Act, such requirement must be read into the statute. We cannot accept such a contention. Firstly, as already noted, there is nothing under Section 80IB (10) of the Act requiring that ownership of the land must vest in the developer to be able to qualify for such deduction. Secondly, term developer has been understood in common parlance as well as in legal sense carrying a much wider connotation. The Tribunal itself in the impugned order has traced different meanings of term developer explained in different dictionaries, which read as under:- “a. The Webster's Encyclopedia unabridged of the English Language gives Following meaning of the term 'developer' as: “1. One who or that which develops; 2.A person who invests in and develops the Urban or Suburban potentialities of real estate. b. Oxford Advanced Learners Dictionary of Current English Fourth Indian Edition gives meaning of the term 'developer' as persons or company that develops land. c. Random House Dictionary of the English Language, the following can be found. Develop: a. To bring out the capabilities or possibilities of; bring to a more advanced or effective state. b. To cause to grow or expand. Developer: a. The act or process of developing; progress. b. Synonym: Expansion, elaboration, growth, evolution, unfolding, maturing, maturation. d. Webster Dictionary,the following definitions emerge: a. To realize the potential of;b. To aid in the growth of Strength, develop the biceps,c. To bring into being: make active (develop a business)d. To convert ( a tract of land) for specific purpose, as by building extensively.e. Law lexicon Dictionary: The followingdefinitions could be seen: Development a. To act, process or result of development or growing or causing to grow; the stateof being developed. b. Happening.” Develop: a. To bring out the capabilities or possibilities of; bring to a more advanced or effective state. b. To cause to grow or expand. Developer: a. The act or process of developing; progress. b. Synonym: Expansion, elaboration, growth, evolution, unfolding, maturing, maturation. d. Webster Dictionary,the following definitions emerge: a. To realize the potential of;b. To aid in the growth of Strength, develop the biceps,c. To bring into being: make active (develop a business)d. To convert ( a tract of land) for specific purpose, as by building extensively.e. Law lexicon Dictionary: The followingdefinitions could be seen: Development a. To act, process or result of development or growing or causing to grow; the stateof being developed. b. Happening.” 32.Section 80IB(10) of the Act thus provides for deductions to an undertaking engaged in the business of developing and constructing housing projects under certain circumstances noted above. It does not provide that the land must be owned by the assessee seeking such deductions. 33. It is well settled that while interpreting the statute, particularly, the taxing statute, nothing can be read into the provisions which has not been provided by the Legislature. The condition which is not made part of Section 80IB(10) of the Act,namely that of owning the land, which the assessee develops, cannot be supplied by any purported legislative intent. 34. We have reproduced relevant terms of development agreements in both the sets of cases. It can be seen from the terms and conditions that the assessee had taken full responsibilities for execution of the development projects. Under the agreements, the assessee had full authority to develop the land as per his discretion. The assessee could engage professional help for designing and architectural work. Assessee would enroll members and collect charges. Profit or loss which may result from execution of the project belonged entirely to the assessee. It can thus be seen that the assessee had developed the housing project. The fact that the assessee may not have owned the land would be of no consequence. 35. With respect to the question whether the assessee had acquired the ownership of the land for the purposes of the Income Tax Act and, in particular, Section 80IB (10) of the Act and to examine the effect of Explanation to Section 80IB(10) introduced with retrospective effect from 1.4.2001, since several aspects overlap, it would be convenient to discuss the same together. 36.We have noted at some length, the relevant terms and conditions of the development agreements between the assessees and the land owners in case of Radhe Developers. We also noted the terms of the agreement of sale entered into between the parties. Such conditions would immediately reveal that the owner of the land had received part of sale consideration. In lieu thereof he had granted development permission to the assessee. He had also parted with the possession of the land. The development of the land was to be done entirely by the assessee by constructing residential units thereon as per the plans approved by the local authority. It was specified that the assessee would bring in technical knowledge and skill required for 36.We have noted at some length, the relevant terms and conditions of the development agreements between the assessees and the land owners in case of Radhe Developers. We also noted the terms of the agreement of sale entered into between the parties. Such conditions would immediately reveal that the owner of the land had received part of sale consideration. In lieu thereof he had granted development permission to the assessee. He had also parted with the possession of the land. The development of the land was to be done entirely by the assessee by constructing residential units thereon as per the plans approved by the local authority. It was specified that the assessee would bring in technical knowledge and skill required for execution of such project. The assessee had to pay the fees to the Architects and Engineers. Additionally, assessee was also authorized to appoint any other Architect or Engineer, legal adviser and other professionals. He would appoint Sub-contractor or labour contractor for execution of the work. The assessee was authorized to admit the persons willing to join the scheme. The assessee was authorised to receive the contributions and other deposits and also raise demands from the members for dues and execute such demands through legal procedure. In case, for some reason, the member already admitted is deleted, the assessee would have the full right to include new member in place of outgoing member. He had to make necessary financial arrangements for which purpose he could raise funds from the financial institutions, banks etc. The land owners agreed to give necessary signatures, agreements, and even power of attorney to facilitate the work of the developer. In short, the assessee had undertaken the entire task of development, construction and sale of the housing units to be located on the land belonging to the original land owners. It was also agreed between the parties that the assessee would be entitled to use the the full FSI as per the existing rules and regulations. However, in future, rules be amended and additional FSI be available, the assessee would have the full right to use the same also. The sale proceeds of the units allotted by the assessee in favour of the members enrolled would be appropriated towards the land price. Eventually after paying off the land owner and the erstwhile proposed purchasers, the surplus amount would remain with the assessee. Such terms and conditions under which the assessee undertook the development project and took over the possession of the land from the original owner, leaves little doubt in our mind that the assessee had total and complete control over the land in question. The assessee could put the land to use as agreed between the parties. The assessee had full authority and also responsibility to develop the housing project by not only putting up the construction but by carrying out various other activities including enrolling members, accepting members, carrying out modifications engaging professional agencies and so on. Most significantly, the risk element was entirely that of the assessee. The land owner agreed to accept only a fixed price for the land in question. The assessee agreed to pay off the land owner first before appropriating any part of the sale consideration of the housing units for his benefit. In short, assessee took the full risk of executing the housing project and thereby making profit or loss as the case may be. The assessee invested its own funds in the cost of construction and engagement of several agencies. Land owner would receive a fix predetermined amount towards the price of land and was thus insulated against any risk. 37.By no stretch of imagination can it be said that the assessee acted only as a works contractor. The terms works contractor has been receiving judicial attention in several cases. xxxxxxxxxxxx 37.By no stretch of imagination can it be said that the assessee acted only as a works contractor. The terms works contractor has been receiving judicial attention in several cases. xxxxxxxxxxxx 41.In the present case, we find that the assessee had, in part performance of the agreement to sell the land in question, was given possession thereof and had also carried out the construction work for development of the housing project. Combined reading of Section 2(47)(v) and Section 53A of the Transfer of Property Act would lead to a situation where the land would be for the purpose of Income Tax Act deemed to have been transferred to the assessee. In that view of the matter, for the purpose of income derived from such property, the assessee would be the owner of the land for the purpose of the said Act. It is true that the title in the land had not yet passed on to the assessee. It is equally true that such title would pass only upon execution of a duly registered sale deed. However, we are, for the limited purpose of these proceedings, not concerned with the question of passing of the title of the property, but are only examining whether for the purpose of benefit under Section 80IB (10) of the Act, the assessee could be considered as the owner of the land in question. As held by the Apex Court in the case of Mysore Minerals Ltd. vs Commissioner of Income Tax (supra), and in the case of Commissioner of Income-Tax vs. Podar Cement Pvt. Ltd. and others (supra), the ownership has been understood differently in different context. For the limited purpose of deduction under Section 80IB(10) of the Act, the assessee had satisfied the condition of ownership also; even if it was necessary. 42.In the case of Shakti Corporation similarly the assessee had entered into a development agreement with the land owners on similar terms and conditions. It is true that there were certain minor differences, however, in so far as all material aspects are concerned, we see no significant or material difference. Here also assessee was given full rights to develop the land by putting up the housing project at its own risk and cost. Entire profit flowing therefrom was to be received by the assessee. It is true that the agreement provided that the assessee would receive remuneration. However, such one word used in the agreement cannot be interpreted in isolation out of context. When we read the entire document, and also consider that in form of “remuneration” the assessee had to bear the loss or as the case may be take home the profits, it becomes abundantly clear that the project was being developed by him at his own risk and cost and not that of the land owners. Assessee thus was not working as a works contract. Introduction of the Explanation to Section 80IB(10) therefore in this group of cases also will have no effect. 43. We may at this stage examine the ratio of different judgments cited by the Revenue. The decision in case of Faqir Chand Gulati vs. Uppal Agencies Private Limited and another (supra) was rendered in the background of the provisions of the Consumer Protection Act. In the case before 43. We may at this stage examine the ratio of different judgments cited by the Revenue. The decision in case of Faqir Chand Gulati vs. Uppal Agencies Private Limited and another (supra) was rendered in the background of the provisions of the Consumer Protection Act. In the case before the Apex Court, the land owner had entered into an agreement with the builder requiring him to construct apartment building on the land in question. Part of the constructed area was to be retained by the owner of the land. In consideration of the land price remaining area was free for the builder to sell. When the land owner found series of defects in the construction, he approached the Consumer Protection Forum. It was in this background the Apex Court was considering whether the land owner can be stated to be a consumer and the builder a service provider. It was in this background that the Apex Court made certain observations. Such observations cannot be seen out of context nor can the same be applied in the present case where we are concerned with the deduction under Section 80IB(10) of the Act. xxxxx xxxxx 45.Under the circumstances, we are of the opinion that the Tribunal committed no error in holding that the assessees were entitled to the benefit under Section 80IB(10) of the Act even where the title of the lands had not passed on to the assessees and in some cases, the development permissions may also have been obtained in the name of the original land owners.” 4.Under the circumstances, in the present group of Tax Appeals also, such question is answered against the Revenue and in favour of the assessees. 5.This brings us to the second question, pertaining to sale of unutilized FSI. Facts are slightly different in each appeal. We may, however, record the facts as arising in Tax Appeal No.549 of 2008, which has been treated as lead matter. 6.For the assessment year 2003-04, the respondent assessee M/s.Moon Star Developers, Baroda, filed its return of income on 1.12.2003 declaring total income at nil. In such return, the assessee had declared gross total income of Rs.26,99,082/- and claimed deduction under section 80IB(10) of the Act on the entire income. The Assessing Officer desired to scrutinize the claim. He, therefore, issued notice under section 143(2) of the Act. He noticed that the assessee had claimed such net profit of Rs.26.99 lacs (rounded off) for development and building of a housing project. He noticed that the development permission granted by the local authority was in the name of one Shri Mustaqbhai Alibhai Patel and others who were the owners of the land. On the issue of deduction under section 80IB(10) of the Act, on the entire profit, he held as under: “7.12The plain reading of section 80IB(10) makes it clear that profit in case of an undertaking developing and building housing project approved by a local authority shall be allowed deduction at 100% of profit derived from such housing project, if the conditions as laid down in sub-section 10 of section 80IB are “7.12The plain reading of section 80IB(10) makes it clear that profit in case of an undertaking developing and building housing project approved by a local authority shall be allowed deduction at 100% of profit derived from such housing project, if the conditions as laid down in sub-section 10 of section 80IB are fulfilled. However, in this case, as discussed above, the firm has not fulfilled the basic condition for claiming deduction, i.e. ownership of land on which housing project is constructed and the approval of local authority is not in the name of the assessee firm. Here I would like to make clear that the partner and partnership firm both are totally separate and different entity and have their own separate rights and obligations. The assessee does not become eligible for deduction u/s 80IB of the Act on the plea that the land of the project was owned by the partner. The contention of the assessee that by entering into development contract it has acquired ownership right of the land has been squarely dealt with in the above discussion and therefore not acceptable. Hence, the deduction u/s.80IB is not admissible. The assessee firm has furnished inaccurate particulars of income, therefore penalty proceedings u/s.271(1)(c) of the I.T. Act is separately initiated. Since this issue is already concluded by this Court in the case of Radhe Developers, we may, for the present discussion, ignore it. 7.The Assessing Officer, noticed that permission for construction was obtained for only part of the permissible FSI, the residential units to be constructed thus had area far less than the maximum permissible built-up area on the land. The assessee, thus, carried out only partial construction out of the total available FSI for the land in question. Though as per the approved plan, construction had been carried out, there was balance FSI available on the plots O/TAXAP/549/2008 JUDGMENT of land which was not utilized. He was, therefore, of the opinion that the assessee could not claim deduction under section 80IB(10) of the Act for the profit relatable to sale of unutilized FSI. He, therefore, called upon the assessee to explain the same. 8.The assessee made a detailed representation contending that it had completed the development and construction of housing project fulfilling all conditions contained in section 80IB(10) of the Act. The project was constructed on 12000 sq. meters of land. As per the building regulations of the local authority, maximum permissible construction was 1.6 times of the land area. As per the building bylaws for development of housing project, 10% of the total land area was to be set apart for common purposes. Primarily, 30 to 35% of the land area was utilised for providing internal roads, effectively, therefore, only 60% of the ground floor area was available for development. As per the building regulations, the constructed area on the ground floor could not exceed 40%. The assessee had completed the construction on the entire area permissible on the ground floor against the maximum construction limit of 3848.10 sq. meters, the assessee had carried out construction of 3573.48 sq. meters. The assessee further contended that the provisions of section 80IB pertain to granting of benefits to the assessee, the same should be interpreted liberally. 9.The Assessing Officer, rejected the assessee’s claim making following observations: further contended that the provisions of section 80IB pertain to granting of benefits to the assessee, the same should be interpreted liberally. 9.The Assessing Officer, rejected the assessee’s claim making following observations: “11. The submission of assessee firm is duly considered but the same was not tenable. The argument that the assessee firm has developed the FSI available @ 40% of area for construction of ground floor houses, therefore the assessee has complied the condition prescribed. The local authority has imposed restriction of construction on ground floor @ 40% of area so that every residential unit have proper light, air and the parking space. Therefore, though anybody can develop property to the extent of 1.6 times of area available subject to maximum ground floor construction @ 40% of the area available. However, the assessee has not consdiered the FSI available on the ground floor i.e. the upper floor of the residential units. Due to non development of of this available FSI, the question raised is still remains unanswered. The fact of the matter is that the assessee firm had undertaken to construct only a part of the FSI available to it under the scheme of things sanctioned by the local authority. The other part of unutilized FSI relating to the approved units have not been constructed or developed, but being sold directly, although as a composite part of unit of tenement itself. From this, it emerges that, the elements of profitability is relatable to the first part of construction of the approved units and the other part of the profit earned by the assessee firm is relatable to the sale of unutilized FSI in respect of which no construction was undertaken. The provisions of section 80IB(10) are clear and unambiguous O/TAXAP/549/2008 JUDGMENT in as much as it serves to benefit those assessees who had derived profits from the activity of development and construction of any housing project. Appreciating the facts involved in this case, assessee firm can be said to have involved in the partial construction of the housing project at one hand and the other hand has enabled assessee firm to derive profit from sale of unutilized FSI, although it may be seen to be an integral part of the housing unit itself. 12.In the context of the above discussion, it is observed that the assessee firm had not undertaken the completion of the project in its entirely as far as development and construction of the utilizable FSI is concerned. The assessee firm had total plot area of 9620 sq. mtrs for development after reduction on account of common plot and roads etc. Thus, it was eligible to construct super built up area of 15392.40 @ 1.6 FSI. The assessee had constructed a housing project by deploying construction of 3573.48 sq. mtrs of FSI. Thus, the FSI of 3573.48 sq. mtrs. Has been utilized for the construction of the same, out of permissible FSI of 15392.40 sq. mtrs. The profits ensuing from entire project for the year as per the profit and loss account, includes additional profit attributable to sale of unutilised FSI has also been booked by the assessee firm. Since the eligible profits forclaim of deduction u/s.80IB(10) can only relateto those from the project of development andconstruction, the profits attributable to thesale of unutilised FSI not relating todevelopment and construction undertaken shall notbecome eligible for the said claim.” He noted that considering the land area and FSI of 1.6, the assessee had 15392.40 sq. meters of construction available for development. As against which, the assessee consumed only He noted that considering the land area and FSI of 1.6, the assessee had 15392.40 sq. meters of construction available for development. As against which, the assessee consumed only 3573.48 sq. meters of FSI and 11818.92 sq. meters remained unutilised. He segregated the assessee’s profit from sale of FSI out of the total figure of Rs.26.99 lacs claimed as profit from sale of housing units. 9.The assessee carried the matter in appeal. CIT (Appeals), rejected the entire claim under section 80IB(10) of the Act and therefore, did not find it necessary to examine this separate aspect of claim for deduction under section 80IB(10) of the Act. He observed as under: “16. In view of the discussions given above, I do not intend to interfere with the action of the Assessing Officer in disallowing the claim of deduction u/s.80IB(10) hence the same is confirmed. Since the disallowance has been confirmed in toto the alternative finding regarding profits attributable to sale of unutilized FSI is not required to be considered.” 10.The assessee then carried the matter in appeal before the Tribunal. The Tribunal allowed theassessee’sappealmakingfollowing observations: “.......... On verification of the sale deed executed in favour of the buyers of the residential houses, it is clear that the assessee had made this sale deed for sale of plot of land. Further, on verification of development agreement with the landowner, we find that here also the reference is with respect to land area only. In both the documents, assessee had not acquired rights and has snot relinquished rights with reference to FSI. Further, on verification of approved map for each unit is with reference to built up area only. Under the circumstances, the assessee has never dealt with FSI, both in terms of acquiring rights in the land and for relinquishment of such rights in the land. The calculation given in approved plan is of maximum permissible FSI and by giving such calculation it is not made mandatory by any provisions of any Act to make construction to the fullest extent of maximum permissible FSI. The utilization of FSI by the builder developer depends on many factors like situation of plot, the type of locality, and the type of buyers affordability. It is the market force, which determines the average size of the residential unit – a commercial decision, which prevails for the purpose of carrying out the business and for making residential units and not the permissible maximum FSI. It would also be impossible to construct any housing unit as per the provisions of Sec.80IB(10) by utilizing the maximum FSI. 64.The AO states further that in the approved lay out plan, the local authority had permitted to build residential unit of lesser area than the maximum permissible built up area on the land and therefore the assessee had carried out only partial construction of the available FSI vis-a-vis the entire plot of land available for development with the assessee. We find that the approved FSI in regard to the units constructed has been fully utililzed as per the approved plan of the local Authority, namely the FSI is fully utilized, the FSI actually passed and permitted by the authorities for each project. 65.The AO observes assessee has sold unutilized FSI without involving any process of development and construction, which is the primary criterion required to be satisfied for the purpose of the claim of deduction under section 80IB of the Act 65.The AO observes assessee has sold unutilized FSI without involving any process of development and construction, which is the primary criterion required to be satisfied for the purpose of the claim of deduction under section 80IB of the Act have no force; that the assessees have claimed deduction under section 80IB of the Act for the profit derived during the year under consideration from the business of development and construction of a housing project which though includes profit earned from sales of unutilized FSI of the housing project also and that the other part of unutilized FSI relating to the approved units have not been constructed or developed but being sold directly, although as a unrestrictive bundle of rights attached with the sale of land plot. As aforesaid, there is no requirement as to FSAI under the schcme of provisions of Sec.80IB(10). In any case the assessee has not sold FSI of plot, even if the unutilized FSI rights are available with the assessee, it is the only way left out of utilizing such unutilized FSI is to make construction on top of the ground floor, which is already being sold to prospective buyers. With this so called unutilized FSI rights, if the assessee wishes to make further construction then it will practically impossible as the assessee is left with no Easement rights for making construction or access to go on top of the ground floor as the ground level rights are already sold to prospective customer. In this situation, it would be practically impossible to make either construction or to give access for construction made. Thus the concept of element of unutilized FSI sold is imaginary; and based on surmises and conjunctures.” 11.In rest of the appeals, facts are similar. Relevant data in such appeals, as provided by the counsel for the assessees, is as under: O/TAXAP/549/2008 JUDGMENT O/TAXAP/549/2008 JUDGMENT 12.The question is, in such facts, whether the Revenue was correct in segregating the assessee’s profit from sale of housing units and denying the benefit of deduction under section 80IB(10) of the Act to the extent the same was relatable to the sale of unutilized FSI or whether the Tribunal was correct in holding that since the assessee fulfilled the conditions of section 80IB(10) of the Act, no part of the claim could be disallowed. 13.Appearing for the Revenue, learned counsel Shri Ketan Parikh contended that the assessee had utilized only a small portion of the available FSI in development of the housing project. The units constructed and sold by the assessee, therefore, had inbuilt element of unused FSI. The purchasers would be entitled to carry out extensive further construction utilizing the remaining FSI. The idea behind giving deduction under section 80IB(10) of the Act was to make residential units for middle income group citizens at affordable cost. Various conditions contained in the said section would bring out this purpose. Granting benefits of section 80IB of the Act in the present case would frustrate such purpose. 14.Counsel further contended that the profit relatable to sale of unused FSI cannot be stated to have been derived from the assessee’s activity of development and construction of housing project. For such purpose, he relied on the following decisions: (1) In the case of CIT v. Sterling Foods, 237 ITR 579. (2) In the case of Pandian Chemicals Ltd. v. CIT, 262 ITR 278.CIT, 262 ITR 278. (3) In the case of Liberty India v. CIT, 317 ITR 218 (SC). ITR 218 (SC). would bring out this purpose. Granting benefits of section 80IB of the Act in the present case would frustrate such purpose. 14.Counsel further contended that the profit relatable to sale of unused FSI cannot be stated to have been derived from the assessee’s activity of development and construction of housing project. For such purpose, he relied on the following decisions: (1) In the case of CIT v. Sterling Foods, 237 ITR 579. (2) In the case of Pandian Chemicals Ltd. v. CIT, 262 ITR 278.CIT, 262 ITR 278. (3) In the case of Liberty India v. CIT, 317 ITR 218 (SC). ITR 218 (SC). 15.Learned counsel Shri M.R.Bhatt who appeared at our request contended that the sale of unutilized FSI cannot be considered as a part of development of a housing project. Profit relatable to such activity, therefore, must be excluded for the purpose of deduction under section 80IB(10) of the Act. He relied on a decision of this Court in the case of CIT v. Gautam Sarabhai Trust in 173 ITR 216 in which in the context of exemption under section 47 of the O/TAXAP/549/2008 JUDGMENT Act from payment of capital gains on amalgamation of companies, the Court ruled that such exemption would be available only to transfer of shares on amalgamation and if besides the share or shares in the amalgamated company, the shareholder is alloted something more, such as bonds or debentures in consideration of the transfer of his share or shares in the amalgamating company, he cannot get benefit under section 47(vii) of the Act. 16.Learned advocate Shri Nitin Mehta adopted the same arguments and drew our attention to a decision of the Delhi High Court in the case of Honda Siel Power Products Ltd. v. CIT, 318 ITR 309 (Delhi) in which the Court held that the profits derived from industrial undertaking from sale of imported machinery and spare parts used for providing after sale service is not profit derived from such industrial undertaking and the assessee would not be entitled to special deductions under section 80HH or 80I of the Act. 17.On the other hand, learned counsel Shri Saurabh Soparkar appearing for the assessees opposed the appeals contending that the only requirement under section 80IB(10) of the Act is development and building of housing project, of course, within the parameters laid down therein. In the present case, it is not even the ground of the Revenue that any of the conditions were breached. Merely because a portion of the FSI available for construction was not fully utilized would not disentitle the assessee from such deduction. In case of M/s.Moon Star Developers, he pointed out that almost entire ground floor area available for construction was so covered by the housing units constructed by the assessee. Full FSI on the ground floor was thus utilised. The assessee had put up a scheme of residential units with only ground floor. The Revenue cannot compel the assessee to design the residential units in a particular manner. To utilize the full FSI, the assessee would have to build three additional floors. There is nothing in the section that compels the assessee to do so. 18.Counsel submitted that in the present case, the entire profit of the assessee was derived from development of a housing project. There was no segregation between sale of residential unit and the unutilized FSI. Such FSI is part and parcel of the residential units constructed by the assessee and sold to the purchasers. There is nothing on record to suggest that the purchasers carried out further extensive construction soon after the sale of the units. 19.Counsel contended that being an 18.Counsel submitted that in the present case, the entire profit of the assessee was derived from development of a housing project. There was no segregation between sale of residential unit and the unutilized FSI. Such FSI is part and parcel of the residential units constructed by the assessee and sold to the purchasers. There is nothing on record to suggest that the purchasers carried out further extensive construction soon after the sale of the units. 19.Counsel contended that being an exemption scheme aimed at encouraging the activity of construction of residential units, the same should be liberally construed. For such purpose, he relied on the following decisions: (1) In the case of CIT, Amritsar vs. Strawboard Mfg. Co. Ld. 177 ITR 431 (SC). (2) In the case of Bajaj Tempo Ltd. v. CIT, 196 ITR 188 (SC). 20.He contended that even if the scheme was to be strictly construed, once the assessee was covered within the scheme, the terms of the scheme for exclusion should be liberally constructed. In this context, he relied on decision in the case of Commissioner of Central Excise, Surat Iv. Favourite Industries, 2012 (278) ELT 145 (SC). 21.He lastly contended that the entire profit arose out of development of housing He lastly contended that the entire project and sale of residential units so constructed. He drew our attention to the decision of this Court in the case of Nirma O/TAXAP/549/2008