COMMISSIONER OF INCOME TAX Vs. MOON STAR DEVELOPERS

JUDGEMENT

(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 respondentsassessees 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 landowners 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 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. 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 substantial question of law for our consideration: -

(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 : -