Special Bench of ITAT rules on deduction under Section 80IB(10)

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Special Bench of ITAT rules on deduction under Section 80IB(10)

AIT News Network

Special Bench of ITAT vide a significant ruling AIT-2009-143-ITAT has decided several issues related to deduction under Section 80IB(10) on housing project and has ruled as under:

· The deduction under section 80 IB (10), as applicable prior to 1st April 2005, subject to and in the light of the observations made in the preceding paragraphs, is admissible in case of a ‘housing project’ comprising residential housing units and commercial establishments. In case these projects are approved as housing projects by the local authority, such an approval as housing project is sufficient for the purposes of eligibility. In any other case, where 90% or more of the total built up area is used for dwelling units, in accordance with the scheme of section 80 IB(10), the benefit of deduction under section 80 IB(10) will not be declined. In case commercial use of built up area is more than 10% but the residential segment of the project satisfies requirements of Section 80 IB(10) on standalone basis, i.e. (i) the size of the plot, excluding portion under commercial unit, is more than minimum area of one acre , (ii) residential units built on such area must satisfy condition of clause (c) of the provision, and (iii) other necessary conditions are fulfilled, and where income from construction of residential dwelling units can be worked out on standalone basis, deduction under section 80 IB (10) will be available in respect of residential segment of the project.

· The deduction under section 80IB(10) is available in respect of profits of housing project as a whole, and, as such, it is not relevant as to what is the portion of profits which can be said to be attributable to residential units. This is subject to the rider that in case commercial use of built up area in a project is more than 10% and, for this reason the project can not be said to be a predominantly housing project, but, in terms of observations made in paragraph 115 above, the assessee is entitled to deduction in respect of residential unit segment of the overall project on fulfillment of necessary conditions, the entitlement of incentive deduction will be confined to only to the profits to the residential segment of the overall project.

· The limit on commercial use of built up area as prescribed by clause (d) of Section 80 IB (10) has no retrospective application, and it applies only w.e.f the assessment year 2005-06.

(Click here for full text of Ruling AIT-2009-143-ITAT)

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