It is not a mandatory requirement to fully utilize the permissible FSI so as to claim deduction u/s S.80IB(10):

AO disallowed assessee’s claim for deduction u/s 80IB(10) on the count that the assessee that the assessee was not the owner of the land on which the housing project under consideration was developed. CIT(A), while confirming the said disallowance, further observed two things viz. a) one particular flat was of 1517.47 sq. ft. i.e. more than 1500 sq. ft. and b) assessee had not properly utilized the area of land i.e. the assessee had not developed one acre of land because, as per permissible FSI, more no. of residential units in multi-storied buildings could have been constructed. On appeal, Hon’ble ITAT held that the issue as to ownership of land is squarely covered in favour of the assessee vide the decision of the Hon’ble Gujarat High Court in the case of CIT vs. Radhe Developers – 341 ITR 403 (Guj). As regards improper development of land, it was held that it is not a mandatory requirement to fully utilize the permissible FSI and there was no condition as to FSI u/s 80IB(10). Thus, the deduction u/s 80IB(10) was restricted only in respect of flat of 1517.47 sq. ft.

[Kamleshkumar Gandalal Shah vs. ITO – ITA No.2709/Ahd/2010 &

 Kamleshkumar Gandalal Shah HUF vs. ITO – ITA Nos.2710-11/Ahd/2010]