Analysis of CBDT Instruction No 4/2009, dated 30th June, 2009

Background

  • An undertaking engaged in developing and building housing projects is entitled to a deduction to the extent of 100% of the profits derived from such housing projects subject to the fulfillment of certain conditions in accordance with the provision of section 80-IB(10) of the Income-tax Act, 1961 (ITA).
  • One such condition requires that the said projects should commence on or after 1 October 1998 and complete within four years from the financial year in which the housing project is approved by the local authority ( In cases where the said approval is obtained on or after 1 April 2004).
  • In the case of an undertaking showing profit on partial completion, there was an issue whether the deduction u/s. 80-IB(10) would be available on a year to year basis or in the year of completion of the project.

Clarification

The Central Board of Direct Taxes (CBDT) has now clarified that the deduction can be claimed on a year to year basis where the assessee is showing profit from partial completion of the project in every year.

Further, it is also clarified that in case it is later found that the condition of completing the project within the specified time limit of 4 years as stated in section 80-IB(10) has not been satisfied, the deduction granted to the assessee in the earlier years should be withdrawn.

Conclusion

The above clarification puts to rest a long drawn controversy regarding timing of claiming deduction u/s 80-IB(10) in respect of housing projects where the assessee was showing profits on partial completion.

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0 responses to “Deduction u/s. 80-IB(10) on YOY basis to builders/developers showing profit on partial completion method”

  1. M. L. Gupta says:

    Yes. In my personal views (Not liable for any risk & reward) it is available for whole project because provisions no where says to have time limit from initial approval of plan.

  2. madhu gupta says:

    1) 1st plan was passed on 15/5/04 for area 5248 sq.mtr (part area of plot) as per PMC and was fully scraped
    2) New revised plan was passed on 9/1/06 for area 9014 sq.mtr (plot)
    3) Actual construction was started in the F.Y 2005-2006 and according to new revised plan.
    4) 3 bldg was constructed “A”, “B,& C
    5) Received completion certificate for A bldg in Nov 2007 and B bldg in Mar 2008.
    6) Received part completion certificate from Pmc for C bldg as 1 NOC for submitted by 31/3/2009. But C bldg was completed and we had received architect certificated and had also applied for completion certificated before 31/3/2009.
    7) Can we claim deduction u/s 80I B for full project
    8.) It is a residential project and all flat are below 1500 sq.ft.

    From Madhu gupta working in a construction co. require for self information.

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