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CIT v. Veena Developers (2015) 277 CTR 297/119 DTR 237/66 taxmann.com 353 (SC)

S. 80IB(10) : Housing Projects – If the project is approved by local authority as housing project with convenience shopping the assessee is entitled to deduction – Prior to
1-4-2005 – Clause (d) inserted to Section 80IB(10) with effect from 1-4-2005 is prospective and not retrospective and hence cannot be applied for the period prior to 1-4-2005.

Facts

Assessee had undertaken construction projects which were approved by the municipal authorities/local authorities as housing projects. Assessee claimed deduction under section 80IB(10) of the Income-tax Act, 1961 as per the provisions in  force prior to  1st April 2005 which granted deduction of  100%  of profits derived by an undertaking developing and building housing projects approved by a local authority if it satisfied the requisite conditions mentioned therein. Assessing officer denied the deduction on the ground that the projects  were not “housing project” as some commercial activity was also undertaken in those projects. The Tribunal allowed the assessee’s claim. The High Court upheld the decision of the Tribunal.

 

Issue

Whether deduction under section 80IB(10) as in force prior to the amendment by the Finance (No. 2) Act, 2004 could be claimed by a housing  project  comprising  of residential units as well as commercial establishments

 

Held

Supreme Court upheld the decision of the High Court which had taken the view that the assessee was eligible for deduction under section 80-IB  of  the Act. Supreme Court held that up to 31st March, 2005, deduction under section 80-IB(10) of the Act is allowable in respect of the entire project  which  is approved by the local authorities as housing project even though the project has some commercial element within the limits prescribed under the Development Control Rules/regulation. Supreme Court also agreed with the decision of the High Court that clause (d) which was inserted in section 80-IB(10) w.e.f. 1st April, 2005 stipulating that the built-up area of the shops and other commercial establishment included in the housing project should not exceed a certain percentage of the built-up area of the housing project was prospective in nature and could not

 

 

 

be applied for the period prior to 1st April, 2005. (SLP (C) Nos. 22450 and Ors      dt. 30-4-2015)

Editorial: Judgment in CIT v. Brahma Associates (2011) 333 ITR 289 (Bom)

affirmed.

 

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