IT Deduction for Affordable Houses cannot be Denied to Builder on ground of Subsequent Changes in Building on Completion of Statutory Conditions: Bombay HC

A Division Bench of the Bombay High Court has recently set aside the denial of income tax deduction under Section 80-IB(10) of the Income Tax Act, 1961 merely on ground of subsequent changes in building after compliance of statutory provisions. 

The dispute in the present appeal centers around whether the assessee was entitled to the benefit of deduction in terms of Section 80IB(10) of the Income Tax Act.

According to Section 80IB(10) of the Income Tax Act, an undertaking is entitled to the benefit of 100% deduction on the profits derived in the previous year relevant to any assessment year from housing projects if the dates fixed in the Section for initiation and completion of construction are compiled with.

One of the relevant provisions of the Sections limit the area of the residential unit to 1000 Sq Ft. if situated within Delhi or Mumbai or 25 kilometers from municipal limits of these cities and to 1500 Sq Ft. at any other place, to be eligible for deduction under Section 80IB(10) of the Income Tax Act.

The assessee-respondent is an undertaking who had developed a residential project at Andheri in Mumbai. It claims deduction in terms of Section 80IB(10) of the Income Tax Act, which was refused by the Assessing Officer on the ground that some of the flats constructed in Tower ‘A’ of its housing project had exceeded the area of 1000 sq.ft.

“The tribunal could not have summarily brushed aside the second report submitted pertaining to the year 2011”, as it clearly reflected that there  there only three units on each floor exceeding 1000 sq.ft. and if that was so, it was urged that the assessee could not be held entitled to the benefit of 100% deduction in terms of Section 80IB(10) of the Income Tax Act, as per the submissions of the assessee in challenge of the order of the Income Tax Appellate Tribunal (ITAT).

The Counsel for the respondent in the present case, emphasized the survey report of 2011 , which was available with the Assessing Officer.

The Bench of Justice Valmiki SA Menezes and Justice Dhiraj Singh Thakur observed that, in the present case, the revenue has failed to establish that the respondent had not only built but also sold the residential units.

It was also observed that, even the completion certificate could not have been issued by the competent authority, as rightly held by the Tribunal, if there was any violation of the approved plans by the municipal authorities. Subsequently, the order of the tribunal allowing the benefit under Section 80IB(10) of the Income Tax Act was upheld.

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