ITAT Mumbai Allows Proportionate Section 80-IB(10) Deduction Despite one Incomplete Building

ACIT Vs Cosmos Constructions (ITAT Mumbai)

One Incomplete Building Need Not Cost Deduction for the Entire Project: ITAT Mumbai Upholds Proportionate Section 80-IB(10) Relief

If only part of a housing project satisfies the conditions for deduction under section 80-IB(10), must the developer lose the deduction for the entire project? The Mumbai Tribunal answered that question in favour of proportionate relief in the case of Cosmos Constructions. Following decisions of the jurisdictional Bombay High Court, it rejected the Revenue’s objection to allowing deduction on profits from the eligible portion of the project.

The order has an important factual qualification: the Tribunal did not find that any of the project’s three buildings was actually incomplete. The Assessing Officer had recorded that construction of all three was completed before the deadline. The Commissioner (Appeals)’s direction for proportionate deduction was a fallback, dependent on verification of the completion certificates.

Three buildings and a 31 March deadline

The assessee claimed section 80-IB(10) deduction on profits from “Cosmos Lounge”, a housing project at Thane comprising Orchid, Angelica and Hollyhock. The claim for the same three buildings had been accepted by the Assessing Officer in a scrutiny assessment for the immediately preceding assessment year, 2011–12.

For AY 2012–13, the question concerned the project completion condition under section 80-IB(10)(a). The project had been approved on 11 June 2006, making 31 March 2012 the relevant completion deadline. Significantly, the Assessing Officer recorded in his assessment order that construction of all three buildings was completed before 31 March 2012.