CIT vs. M/s Brahma Associates (Bombay High Court)

DATE: (Date of pronouncement)
DATE: February 23, 2011 (Date of publication)

Click here to download the judgement (brahma_associates_80_IB_10_housing_project.pdf)

Pre AY 05-06, a project approved as “housing project” by local authority eligible for deduction u/s 80-IB(10) irrespective of extent of commercial user

In AY 2003-04 the assessee undertook the construction of a project at Pune which was approved as a “residential plus commercial” project. The commercial area of the plot was 20.83% of the total area. The assessee claimed deduction u/s 80-IB(10) which was denied by the AO & CIT (A) on the ground that the expression “Housing Project” in s. 80IB(10) applied only to projects consisting of residential units and not to projects having commercial units. On appeal, the Special Bench (119 ITD 255) held that pre the amendment in AY 2005-06, if the project was approved by the local authority as a “housing project” or if the project was approved as “residential plus commercial” and the commercial user did not exceed 10% of the BUA, deduction was allowable in entirety. However, if the commercial user exceeded 10%, deduction was allowable only on the residential units. On appeal by the department to the High Court, HELD:

(i) S. 80-IB(10) (pre amendment w.e.f. AY 2005-06) does not define the expression ‘housing project’ but refers to housing projects which are approved by the local authorities. Under the local laws, the authorities are empowered to approve projects as “housing projects” with commercial user to the extent permitted under the DC Rules framed by the respective local authority. Accordingly, if the legislature intended to restrict the benefit of deduction only to the projects approved exclusively for residential purposes, then it would have stated so. However, as the legislature has provided that the deduction is available to all housing projects approved by a local authority, the result is that even projects with commercial user approved as a “housing project” are eligible for deduction;

(ii) While the Special Bench was right in holding that a project with residential and commercial user to the extent permitted under DC Rules would be a “housing project” and eligible for deduction, it was not justified in confining the deduction only to projects having commercial area upto 10% of the BUA because once the basic argument of the revenue that the housing projects with commercial user are not entitled to Section 80IB(10) deduction is rejected, no restriction could be imposed. If the project is approved as a “housing project” deduction u/s 80-IB(10) is allowable irrespective of the commercial area;

(iii) The insertion of clause (d) to s. 80-IB(10) w.e.f. 1.4.2005 to deny s. 80-IB (10) deduction to projects having commercial user beyond the prescribed limits is not retrospective.

4 comments on “CIT vs. M/s Brahma Associates (Bombay High Court)
  1. Rangarajan K.E.B says:

    It is a really welcome decision, considering the fact when there are multi-floor houses of more than 250 flats with an average four plus inhabitant in each of them, there is requirement for commercial stalls such as provision store, fruit & vegitable store, fancy / stationery store, electrical/hardware & sanitary store, washer man, hair stylist, pharmacy etc. Even a post office / courier shop and/or a bank may be located in the complexe. Then how can determine the commercial component thereof.

  2. gopal says:

    nice decision help to construction industries and avoid lot of letigation on the point issue due to two or more views


    As per the facts as narrated in the HC’s judgment, the subject project is one comprising (a) fifteen residential buildings and (b) two commercial buildings. As such, admittedly, what were constructed for sale for commercial use were two independent buildings; not ‘units’ of any of those fifteen buildings separately constructed for sale, exclusively for ‘residential’ use.

    Now, turning to the relevant provisions of sub-section (10) of section 80 IB, according to a harmonious reading and plain understanding, the ‘housing project’ as envisaged therein, if strictly construed, seem to cover within its ambit only such building(s) in which are comprised ‘units’- mainly intended for use as ‘family units’, with the rest for use for ‘commercial purposes’.

    The point of subtle distinction made can be better appreciated provided one keeps in view and takes into consideration also the legal implications of the special enactment in force in the state governing the activity of construction and sale of ‘units’ of a building (known as ‘flats’),

    The above mentioned aspects do not seem to have been brought out in the course of the arguments put forth; hence, not gone into by the court.

    KEY NOTE: According to one’s information, the local authority, for the purpose of granting its ‘approval’ to any ‘housing project’ of such a type as in the court case, is duty bound to abide by and expected to , even in the normal course, and necessarily take into account the implications of the referred special enactment applicable to ‘units’ (flats). No doubt, this is a matter which calls for an in-depth study and closer examination by those having specialised knowledge, experience, and exposure.



    FM pushes for affordable homes; full tax rebate to builders
    Posted: 04 Mar 2011 07:08 AM PST

    My comment @the above post, covering a recent gudget proposal, on the website of – Taxguru, goes to supplement my comments herein before.


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