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Facts
The assessee, a partnership firm in building construction, claimed deduction under Section 80IB(10) for Rs. 10,00,000/- received from the sale of lawn cultivated within project premises. Additionally, the assessee claimed exemption for this income under Section 10(1) as agricultural income. The Assessing Officer and CIT(A) disallowed both claims.
Held
The tribunal held that income from the sale of lawn was not eligible for deduction under Section 80IB(10) as it was not part of the eligible housing project or construction activity. However, it partially allowed Ground No. 1 by directing the Assessing Officer to restrict the addition to Rs. 7,00,000/-, estimating net income at 70% of the gross receipts. The tribunal also held that the income from the sale of lawn did not qualify as agricultural income under Section 10(1) because the activity did not involve basic agricultural operations as defined by the Act.
Key Issues
1. Whether income from the sale of lawn grown in project premises is eligible for deduction under Section 80IB(10) of the Income Tax Act, 1961. 2. Whether the income from the sale of lawn qualifies as agricultural income eligible for exemption under Section 10(1) of the Income Tax Act, 1961. 3. If not eligible, whether the disallowance should be based on gross receipts or estimated net income.
Sections Cited
250, 143(3), 80IB(10), 10(1), 143(2), 142(1), 2(1A)
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Income Tax Appellate Tribunal, SMC BENCH, PUNE
Before: Dr. MANISH BORAD
Assessee by : None Revenue by : Shri Vishwajit Shinde, JCIT Date of hearing : 22.01.2026 Date of : 03.02.2026 pronouncement आदेश/ORDER PER DR. MANISH BORAD, ACCOUNTANT MEMBER :- This appeal at the instance of the assessee is directed against the order of Ld. CIT(A), Pune dated 23.07.2025 framed u/s 250 of the Income Tax Act, 1961 for A.Y. 2012-13 which is arising out of order passed u/s 143(3) of the Act dated 30.03.2015.
When the case called for none appeared on behalf of the assessee. On the previous two occasions on the date fixed on 28.10.2025 and 18.11.2025, assessee failed to respond in spite of serving valid notice of hearing. I therefore proceed to adjudicate the appeal with the assistance of Ld. Departmental Representative (DR) and available records.
Assessee has raised following grounds of appeal:- 1.On the basis of the facts and circumstances of of the case and as per law, the CITIA) is not justified in confirming disallowance deduction u/s 801B (10) of the Act in respect of income received from sale of lawn amounting to Rs. 10,00,000/-, when the lawn was cultivated and grown as integral part of the eligible project.
2. Without prejudice to above Ground of Appeal the basis of the facts and and on circumstances of the case and as per law, the CIT (A) is not justified in not granting exemption u/s. 10(1) in respect of activity of cultivation and sale of lawn.
3. The appellant craves for the addition to, deletion, alteration, modification of the above grounds of appeal.
4. Ld. Departmental Representative (DR) vehemently argued supporting the order of Ld. CIT(A) stating that for the income received by the assessee from sale of lawn at Rs. 10,00,000/- is not eligible for deduction u/s 80IB(10) of the Act nor is exempted u/s 10(1) of the Act.
5. I have heard Ld. DR and perused the record placed before me. Assessee is a Partnership firm engaged in Building construction business. ‘NIL’ income declared in the return of income furnished on 30.09.2012. After the case being selected for scrutiny followed by valid serving statutory notices u/s 143(2) and 142(1) of the Act, Ld. Assessing Officer (AO) carried out the assessment proceedings. Ld. AO observed that the assessee constructed the flats at Suyojit Garden Phase two project which were completed in March, 2011 and the income has been claimed as deduction u/s 80IB(10) of the Act. During the year under consideration assessee has shown income from sale of lawn grown in the premises of the project amounting to Rs. 10,00,000/- and claimed deduction u/s 80IB(10) of the Act. Ld. AO has observed that said income is not eligible for deduction u/s 80IB(10) and disallowed the claim and assessed the income at Rs. 10,00,000/-
6. Aggrieved assessee preferred appeal before Ld. CIT(A) who has discussed the issue in detail regarding the claim of assessee for deduction u/s 80IB(10) of the Act for the alleged sum and also the lawn claim of the assessee for exemption u/s 80IB(10) of the Act as follows:- 5.4 The appellant is a partnership firm engaged primarily in the construction and development of residential housing projects. For the AY 2012-13, the firm reported income from its housing project named "Suyojit Lawns, Phase II", located at Survey No. 100, Satpur, Nashik. The firm claimed that the construction of this project was completed in March 2011, and the flats therein were sold during the relevant financial year. This project formed the core business activity of the appellant for the assessment year in question, and the income derived from the sale of these residential units was claimed as exempt under the provisions of Section 80IB(10) of the Act.
5.5 Under section BOIB(10) of the Act, the appellant claimed a deduction on the entire profit earned during the year, which included the primary income from the sale of residential flats in the Suyojit Lawns Phase II housing project and an additional Income of Rs.10,00,000/- from the sale of lawns cultivated and sold from an adjacent plot of land (Survey Nos. 702/2 and 702/3), referred to as "Suyojit Garden" The appellant argued that although the lawns were developed on a different survey number, the site was part of the overall housing project infrastructure, and thus, the proceeds from selling these lawns should also quality for deduction under Section 801B(10). It was further contended that the lawn cultivation was an incidental activity to the main construction project and occurred within the boundaries or open spaces of the approved housing layout.
5.6 The AO, however, rejected the appellant's claim for deduction of Rs. 10,00,000/-uls 80IB(10) of the Act for the following reasons:
Lawns Not Part of the Eligible Project: The AO noted that the lawns were cultivated and sold from Survey Nos. 702/2 and 702/3, while the housing project eligible u/s 80IB(10) of the Act was located at Survey No. 100. Satpur. The project at Survey Nos. 702/2 and 702/3, referred to as "Suyojit Garden," had already been completed in FY 2008-09, and deductions us 80IB(10) of the Act had already been claimed and allowed for that project in previous years. Hence, the AO concluded that the lawns were developed on a separate and already completed project not on the land relevant to the current deduction claim.
Income Not Related to Construction Activity: The AO observed that the income from the sale of lawns arose from agricultural or landscaping activity conducted after the project was completed and the completion certificate was obtained. As a result, the AO considered this income as incidental or unrelated to the core construction business, and hence ineligible for deduction uls 80IB(10) of the Act, which is intended only for profits derived directly from eligible housing project development. 3.Lack of Supporting Documentation: The AO also noted the absence of specific documentation regarding: Expenditure incurred in cultivating, cutting, and transporting the lawns. Dates and mode of sale to the buyer (M/s Organica). Separate accounting records for the lawn activity. The AO held that this lack of detail made it difficult to establish the nature and scope of the activity and whether it formed part of the business income of the appellant.
Consequently, the entire Rs. 10,00,000/- was disallowed as a deduction under Section 801B(10) and brought to tax as regular business income. 5.7 I have carefully considered the assessment order, submissions made during appellate proceedings. It is undisputed that the land on which the lawns were cultivated is located at Survey Nos. 702/2 and 702/3, which relates to the Suyojit Garden project. This project was completed in F.Y. 2008-09, and the appellant had already claimed deduction u/s 801B(10) in respect of profits from that project in earlier years. Further, no unsold fiats or ongoing development activities remained at the time the lawn activity was undertaken. Section 801B(10) provides a deduction for profits derived from the development and construction of eligible housing projects. The income in question-generated through the sale of lawns does not arise from construction activity, nor is it integrally connected with the development of the Suyojit Lawns Phase II project located at Survey No. 100, for which the current year's deduction was claimed. Thus, the income of Rs. 10,00,000/- from sale of lawns is neither attributable to an eligible project, nor related to any development activity as contemplated under Section 80IB(10) 5.8 It is further noted that the activity of growing and selling lawns was carried out after completion and sale of the original housing project on Survey Nos. 702/2 and 702/3. Any income earned after obtaining the completion certificate and cessation of core construction activities cannot be considered as "profits derived from a housing project under Section 80IB(10). 5.9 In light of the above, the claim for deduction of Rs. 10,00,000/- under Section 80IB(10) in respect of income from the sale of lawns is not tenable. 5.10 The appellant has taken a without prejudice argument to restrict the disallowance in respect of income from sale of lawn to the net profit instead of gross receipts. I find merit in this argument of the appellant that only the net income from the impugned activity should be taxed. From the overall facts and circumstances of the case, I am of the considered opinion that net income from the said activity should be fairly estimated @70% of the gross receipts. In view of the same, the Ld. AO is directed to restrict the addition to Rs.7,00,000/-, Thus, Ground No. 1 is partly. allowed. Ground No. 2: 6.1 Vide this ground of appeal the appellant has contended that without prejudice to the above ground of appeal, the AO is not justified in not considering the impugned income of Rs. 10,00,000/- eamed by the appellant on account of sale of lawns as agricultural income. 6.2 dated 27.03.2019 in support of this ground of appeal. Relevant part of the submission During the appellate proceedings the appellant made submissions vide letter is reproduced as under: Without prejudice to the above ground of appeal, the sale of lawns of Rs. 10,00,000/- or as the case may be income therefrom is the agricultural income for the appellant firm, which is also exempt u/s 10(1), Therefore, without prejudice, the A.O. may be directed to treat the income from producing & sale of lawns as agricultural income exempt under tise provisions of law. Findings and decision of the Appellate Authority: 6.3 Section 10(1) exempts income which is classified as Section 2(1A) of the Act. As per established law and judicial interpretation, agricultural income must involve: as agricultural income" under 1. Basic Operations on Land such as tilling, sowing, planting, and nurturing of crops, and 2. Subsequent Operations related to the growth and harvesting of agricultural produce.
6.4 In the present case, the appellant has not established that the activity of growing ornamental lawns constitutes an agricultural operation as understood under the Act. Unlike crops or commercial plantation activities, landscaping or turf cultivation intended for aesthetic or commercial use (e.g., resale to nurseries or for lawns) does not automatically fall within the ambit of agricultural income. 6.5 Further, in the absence of any proof of basic agricultural operations or systematic cultivation, the appellant's claim does not satisfy the statutory test. Moreover, no separate agricultural accounts or land use records were furnished to substantiate this claim. 6.6 In view of the above, this ground is dismissed.
I have gone through the finding of Ld. CIT(A) and failed to find any inconsistency in the said finding because assessee is qualified for deduction u/s 80IB(10) of the Act for the housing project and the said claim has already been allowed. The lawn grown on the said plot of land cannot be a part of the housing project eligible for deduction u/s 80IB(10) of the Act. Assessee claim of exemption u/s 10(1) is also not allowable as the assessee has not carried out any activity in the nature of agricultural operation for cultivating the lawn and therefore the sale of lawn i.e. the grass which is grown on the vacant plots/open area cannot be considered as agricultural income for the purpose of claiming exemption u/s 10(1) of the Act. Therefore finding of Ld. CIT(A) needs no inference. Grounds raised by the assesssee are dismissed.
In the result, appeal of the assessee is dismissed.
Order pronounced on this 03rd day of February, 2026.
Sd/- (MANISH BORAD) ACCOUNTANT MEMBER पुणे/ Pune; दििांक / Dated: 03rd February, 2026. Neeta आिेश की प्रधिधलधप अग्रेधर्ि / Copy of the Order forwarded to:
1. 1. अपीलार्थी / The Appellant. 2. प्रत्यर्थी / The Respondent.
3. The Pr. CIT concerned. 4. धवभागीय प्रधिधिधि, आयकर अपीलीय अधिकरण, "SMC" बेंच, पुणे / DR, ITAT, "SMC" Bench, Pune. 5. गार्ा फाइल / Guard File. आिेशािुसार / BY ORDER, Assistant Registrar आयकर अपीलीय अधिकरण, पुणे / ITAT, Pune S.No. Details Date Remarks 1. Draft dictated on 23.01.2026 P.S.
Draft placed before author .02.2026 A.M.
Draft proposed & placed .02.2026 J.M. before the Second Member 4. Draft discussed/approved by .02.2026 J.M. Second Member 5. Approved Draft comes to the .02.2026 P.S. Sr. PS/PS 6. Kept for pronouncement on .02.2026 P.S.
Date of uploading of Order .02.2026 P.S.
File sent to Bench Clerk .02.2026 P.S.
Date on which the file goes to .02.2026 the Head Clerk 10. Date on which file goes to the .02.2026 A.R.
Date of Despatch of order .02.2026