CA Sandeep Kanoi
Deduction u/s. 80I1B(10) on housing project at Damodar Residency has been denied primarily on two counts(i) the area of the housing project is less than 1 acre, and (ii) the land on which the housing project has been developed does not belong to the assessee. So far as the first objection of the Revenue is concerned it is an undisputed fact that the project Damodar Residency is being developed on a total area of land admeasuring 14,400 Sq. Mtrs. On the said land, total 7 buildings have been approved i.e. A1 to B5 which are residential and buildings B1 and B2 that are commercial. The development agreement dated 06-06-2007 vide which the assessee has acquired development rights in respect of buildings A2 and A3, open space, internal road and building B1 on land measuring 4371 Sq. Mtrs. has not been disputed by the Revenue. A supplementary agreement dated 12-05-2008 was executed between the owners and the assessee confirming the lay out plan of the total plot of land on which buildings A2, A3 and B1 and open area was to be developed by the assessee. As per the lay out plan the area on which buildings A2 and A3 were developed is measuring 4100 Sq. Mtrs. The assessee has claimed deduction u/s. 80IB(10) in respect of residential buildings A2 and A3 only. Thus, the total area of plot on which the residential project is developed by the assessee stands on land measuring more than 1 acre (conversion 1 acre = 4047 Sq. Mtrs.). Even if the project developed by the assessee is considered as the part of the larger project even then the area of plot is much more than the minimum area specified under the provisions of section 80IB(10) of the Act. There is no bar to claim deduction u/s. 80IB(10) on the housing project which has been developed on a plot of land having area more than 1 acres, even if some other residential projects are already in existence thereon.
The Hon’ble Bombay High Court in the case of CIT Vs. Vandana Properties (supra) has held that the provisions of section 80IB(10) does not mandate that the housing project should be on a vacant plot having minimum area. The housing project is eligible for deduction u/s. 80IB(10) subject to fulfilling other conditions, if it is on a plot where other housing projects are already in existence. The relevant extract of the judgment of the Hon’ble High Court in the case of CIT Vs. Vandana Properties (supra) reads as under:
“27. Moreover, plain reading of Section 80IB (10) does not even remotely suggest that the plot of land having minimum area of one acre must be vacant. The said Section allows deduction to a housing project (subject to fulfilling all other conditions) constructed on a plot of land having minimum area of one acre and it is immaterial as to whether any other housing projects are existing on the said plot of land or not. In these circumstances, construing the provisions of Section 80IB (10) by adding words to the statute is wholly unwarranted and such a construction which defeats the object with which the Section was enacted must be rejected.
28. Apart from the above, the Central Board of Direct Taxes (CBDT) by its letter dated 4th May 2001 addressed to the Maharashtra Chamber of Housing Industry has stated thus:
“The undersigned is directed to refer to your letter No.MCHI:RSA:m:388/19799/3 dated 1st January 2001 and to state that the additional housing project on existing housing project site can qualify as infrastructure facility under Section 1 0(23G) and 80IB (10) provided it is taken up by a separate undertaking, having separate books of accounts, so as to ensure that correct profits can be ascertained for the purpose of Section 80IB and also to identify receipts and repayments of long term finances under the provisions of Section 1 0(23G), separately financing arrangements and also, if it separately fulfills all other statutory conditions listed in Sections 1 0(23G) and 80(B(10). With regard to your query regarding the definition of Housing Project, it is clarified that any project which has been approved by a local authority as a housing project should be considered adequate for the purpose of Section 1 0(23G) and 80IB(10)“
29. From the aforesaid letter of CBDT, it is clear that for the purposes of Section 80IB(1 0) it is not the mandate of the Section that the housing project must be on a vacant plot of land having minimum area of one acre and that where a new housing project is constructed on a plot of land having minimum area of one acre but with existing housing projects would qualify for Section 80IB(1 0) deduction. Even otherwise, the argument of the Revenue does not stand to reason because, in the city of Mumbai where there is acute space crunch, it is difficult to find a vacant plot having minimum area of one acre and even if few such plots are existing it cannot be said that Section 80IB (10) deduction was intended to give benefit only to the undertakings who construct housing projects on those few plots. Therefore, it is clear that on a plot of land having minimum area of one acre, there can be any number of housing projects and so long as those housing projects are approved by the local authority and fulfill the conditions set out under Section 80IB(1 0), the deduction there under cannot be denied to all those housing projects. Section 80IB(1 0) while specifying the size of the plot of land, does not specify the size or the number of housing projects that are required to be undertaken on a plot having minimum area of one acre. As a result, significance of the size of the plot of land is lost and, therefore, the assessee subject to fulfilling other conditions becomes entitled to Section 80IB(1 0) deduction on construction of a housing project on a plot having area of one acre, irrespective of the fact that there exist other housing projects or not. In these circumstances, the decision of the Tribunal in rejecting the contention of the Revenue regarding the size of the plot cannot be faulted.”
So far as the objection of the Department that the land on which the housing project is developed is not owned by the assessee and is still undivided, we do not find any merit. The Hon’ble Madras High Court in the case of CIT Vs. Sanghvi and Doshi Enterprise (supra) has held that ownership of land is not a criteria to decide status of developer to claim deduction u/s. 80IB(10). The provisions of section 80IB(10) does not require that the developer who owns the land is only eligible to claim deduction u/s. 80IB(10).
Thus, in the facts of the case and the case laws discussed above, we are of the considered view that the authorities below have erred in coming to the conclusion that the housing project of the assessee at Damodar Residency is not eligible to claim deduction u/s. 80IB(10) of the Act.