Section 80-IB Deduction Denied as Housing Project Covered Less Than One Acre: ITAT Cochin

P.V. Hemalatha Vs CIT (ITAT Cochin)

The Cochin Bench of the Income Tax Appellate Tribunal (ITAT) disposed of two appeals filed by the assessee for Assessment Years 2009-10 and 2018-19 through a common order, as both involved the common issue of eligibility for deduction under Section 80-IB(10) of the Income-tax Act, 1961.

For Assessment Year 2009-10, the assessee, engaged in the business of constructing residential apartments and earning remuneration, interest on capital from firms, and insurance commission, filed a revised return claiming deduction of ₹3,13,19,704 under Section 80-IB(10). The original assessment under Section 143(3) allowed the deduction.

Subsequently, the Commissioner revised the assessment under Section 263 after examining the assessee’s claim. The Commissioner observed that although the assessee owned a total of 117.5 cents of land, the approved housing project covered only a portion of the land. According to the approved plan, out of the total land area of 4,755.22 square metres, 1,899.53 square metres had been earmarked for a second phase that was not proposed for development when the building permit was granted. As a result, the housing project was found to have been constructed on only 70.57 cents of land. Since Section 80-IB(10) requires the project to be situated on a plot having a minimum area of one acre, the Commissioner held that the assessment allowing the deduction was erroneous and prejudicial to the interests of the Revenue and restored the matter to the Assessing Officer for fresh assessment.

In the fresh assessment, the Assessing Officer held that the project did not satisfy the statutory requirement of being situated on a plot of at least one acre and consequently disallowed the deduction claimed under Section 80-IB(10).

The Commissioner of Income Tax (Appeals) upheld the disallowance. It was observed that although the assessee owned land exceeding one acre, the housing project approved by the Kozhikode Corporation covered only 2,856 square metres, equivalent to approximately 0.70 acre. The appellate authority further noted that the remaining land measuring about 1,900 square metres had been used for constructing a bungalow for the assessee’s personal residence. Accordingly, it concluded that the eligible housing project itself occupied only 0.70 acre and therefore failed to satisfy the minimum one-acre condition prescribed under Section 80-IB(10). The appeal was dismissed.

The assessee argued before the Tribunal that the issue was covered by the Bombay High Court’s decision in CIT v. Vandana Properties. It was submitted that the existence of a bungalow on part of the land should not result in denial of deduction for an otherwise eligible housing project and that Section 80-IB(10) does not prohibit construction of another structure on the same land. The assessee also relied on the assessment for Assessment Year 2015-16, in which deduction under Section 80-IB(10) had been allowed during limited scrutiny. Reference was also made to the building permit and approved construction plan.

The Revenue supported the orders of the lower authorities, contending that the project itself had not been constructed on a plot measuring at least one acre, which is a mandatory statutory condition for claiming deduction. It also submitted that the order for Assessment Year 2015-16 could not govern the present case because that year involved only limited scrutiny and was not the first year of the claim.

The Tribunal examined Section 80-IB(10)(b) and observed that the deduction is available only where the housing project is situated on a plot having a minimum area of one acre. It held that the statutory requirement specifically relates to the land on which the eligible housing project is constructed. While land used for common amenities forming an integral part of the approved housing project may be included, land used for purposes unrelated to the project cannot be counted towards satisfying the one-acre requirement.

FULL TEXT OF THE ORDER OF ITAT COCHIN

1. These two appeals filed by P. V. Hemalatha for AYs 2009-10 and 2018-19 involve a common issue and are, therefore, disposed of by this common order.

2. ITA No. 960/Coch/2025 relates to assessment year 2009-10 and is directed against the appellate order dated 16 October 2025 passed by the National Faceless Appeal Centre, Delhi [the Id. CIT(A)]. By that order, the Id. CIT(A) dismissed the assessee’s appeal against the assessment order dated 23 March 2015, passed by the DCIT, Circle-1(1), Kozhikode [the Id. AO], under section 143(3) read with section 263 of the Income Tax Act, 1961 [the Act]. Aggrieved, the assessee is in appeal before us.

3. Briefly stated, the assessee is an individual engaged in the business of constructing residential apartments and earns remuneration and interest on capital from firms, besides insurance commission. For AY 2009-10, she filed her return of income on 23 September 2009 declaring total income of 1,426,500, which was revised on 13 October 2009 to 2,412,180.

4. In her return of income, the assessee claimed deduction of 31,319,704 under section 80-IB (10). The return was selected for scrutiny, and assessment under section 143(3) was completed by order dated 8 November 2011, determining total income at 2,477,180.

5. Subsequently, the learned CIT revised the order, holding that the assessment order passed by the Id. AO was erroneous and prejudicial to the interests of the Revenue. The revision was primarily based on verification of the assessee’s claim for deduction under section 80-IB (10), which showed that she had constructed an 11-storeyed residential apartment at Kozhikode Taluka under building permission dated 16 November 2005 and completion certificate dated 10 October 2008. The learned CIT noted that, as per document No. 639/88, the assessee held 44 cents of land in Survey No. 182/1 and 73.5 cents in Survey No. 185/1, aggregating to 117.5 cents. However, under the approved plan, out of the total area of 4,755.22 sq. m., 1,899.53 sq. m. was earmarked for a second phase that was not proposed for development when the building permit was granted. Accordingly, the learned CIT found that the project was constructed on only 70.57 cents of land. Since section 80-IB (10) requires the project to be on a plot of at least one acre, the deduction allowed by the Id. AO was held to be erroneous and prejudicial to the interests of the Revenue.

6. Based on this the learned CIT restored the matter to the AO to make a fresh assessment.

7. In paragraph 6.1 of the assessment order, the Id. AO held that the project did not satisfy the requirement of being situated on a minimum area of one acre. Accordingly, he disallowed the assessee’s claim for deduction of 3,13,19,704 under section 80-IB (10) of the Act and passed the assessment order dated 23 March 2015 under section 143(3) read with section 263 of the Act.

8. Aggrieved, the assessee preferred an appeal before the Id. CIT(A), relying on the decision of the Hon’ble Bombay High Court in CIT v. Vandana Properties (2013) 353 ITR 36. After considering the assessee’s explanation, the Id. CIT(A) held that such reliance was misplaced. In paragraph 6.6 of the appellate order, he noted that although the total plot area available to the assessee was 4,755.22 sq. m., which exceeded one acre, the housing project had been approved by the Kozhikode Corporation on only 2,856 sq. m., which was below the prescribed one-acre requirement. Since the conditions under section 80-IB arise from the approval granted by the local authority, the relevant consideration was the plot area for which such approval was granted. The Id. CIT(A), therefore, observed that the Corporation had approved the project on a plot area of 2,856 sq. m., equivalent to only 0.70 acre.

9. He further noted that, based on the physical enquiries conducted by the Id. AO, the assessee had constructed a bungalow of 4,000 sq. ft. for her own use on the balance plot area measuring about 1,900 sq. m. Accordingly, he held that the housing project was undertaken on only 0.70 acre, which was less than the one-acre requirement under clause (b) of section 80-IB(10) of the Act. Since the assessee had not satisfied this condition, he concluded that she was not entitled to deduction under section 80-IB (10).

10. The Id. CIT(A) also noted that, as per information available on the e-filing portal during the assessment proceedings for AY 2018-19, the assessee had sold Flat No. 1OF on the 10th floor of this project by agreement dated 17 May 2017. On examining Schedule A to that agreement, he found that the construction related only to old Survey No. 185/1 and covered an area of less than one acre, thereby reinforcing the earlier finding. Accordingly, the assessee’s appeal was dismissed.

11. The learned authorised representative submitted a paper book and contended that the issue is squarely covered in favour of the assessee by the decision of the Hon’ble Bombay High Court in CIT v. Vandana Properties, which the Id. CIT(A) rejected without assigning any reason. He submitted that the existence of a bungalow constructed for the appellant’s personal use, in respect of which no deduction under section 80-IB was claimed, cannot justify denial of deduction for an otherwise eligible housing project. He further argued that section 80-IB does not prohibit any other structure from existing on the plot. Reliance was also placed on the assessment proceedings for AY 2015-16, in which the assessee’s case was selected for limited scrutiny to verify the deduction under Chapter VIA. By assessment order dated 21 December 2017, the assessee was allowed deduction under section 80-IB (10). He then extensively referred to the decision in Vandana Properties to submit that the issue stands covered in the assessee’s favour. He also referred to the building permit issued by the Kozhikode Corporation on 16 November 2015 and the map/construction plan. Accordingly, he submitted that the assessee is entitled to deduction under section 80-IB (10) of the Act. The learned authorised representative vehemently submitted a written note as well as the paper book.

12. The learned Departmental Representative strongly supported the orders of the lower authorities and submitted that the assessee had not constructed the housing project on a plot of at least one acre, which is a basic condition for claiming deduction under section 80-IB (10) of the Act. Since the plot on which the housing project was constructed did not satisfy this statutory requirement, he contended that the learned CIT, in the revisionary order under section 263, and the Id. AO, while passing the assessment order pursuant to that order, rightly denied the assessee’s claim. He further submitted that the Id. CIT(A) had also noted that the assessee had constructed a bungalow for her own residence on part of the plot and, therefore, the housing project for which deduction was claimed did not extend to one acre. Accordingly, the deduction was not allowable. He also argued that the assessee’s reliance on the assessment order for AY 2015-16 was misplaced, as that year was selected only for limited scrutiny and was not the first year of the claim.

13. We have carefully considered the rival contentions and perused the orders of the lower authorities.

14. Section 80-IB (10) of the Income-tax Act, 1961 provides a significant incentive for undertakings engaged in developing and building housing projects. It allows for a deduction of one hundred per cent of the profits derived from such eligible housing projects. This provision was introduced to promote the development of affordable housing by setting specific criteria for project approval, completion, size, and the nature of residential units. To claim the 100% deduction under Section 80-IB (10) of the Income-tax Act, 1961, an undertaking must fulfil several conditions. While various conditions relate to the commencement and completion dates of the project, the built-up area of residential units, and restrictions on commercial establishments and allotment, the specific condition relevant to issue is found in clause (b) of sub-section (10) of Section 80-IB of the Income-tax Act, 1961. Clause (b) of sub­section (10) of Section 80-IB of the Income-tax Act, 1961, explicitly states that the deduction is available if “the project is on the size of a plot of land which has a minimum area of one acre.” This is a crucial condition, and its interpretation is central to determining eligibility in impugned case.

15. Based on the provisions of Section 80-IB(10)(b) of the Income-tax Act, 1961, and its interpretation, the deduction for profits from a housing project is available if The statutory requirement for a minimum plot area of one acre applies specifically to the land on which the eligible housing project is constructed. Undeniably based on judicial precedents have clarified that this ‘plot of land’ can include areas designated for common amenities like gardens, roads, and playgrounds, provided they are an integral part of the approved housing project and form a cohesive unit, the inclusion of land occupied for any other use other than project i.e. which is not part of the approved housing project or its common amenities, does not satisfy this condition. The phrase “the project is on the size of a plot of land” directly links the minimum area requirement to the specific land parcel on which the housing project itself is being developed and constructed. The law requires this particular plot of land, dedicated to the housing project, to measure not less than one acre. It does not refer to the entire contiguous landholding of the assessee, especially if parts of that land are not integral to the approved housing project.

16. The sole issue is whether the housing project constructed by the assessee was situated on a plot measuring at least one acre. The assessment order for AY 2009-10 shows that the total plot area on which the assessee constructed the housing project is less than 1 acre only 70.57 cents and, therefore, did not satisfy the statutory condition.

17. It is not disputed that the assessee is claiming that 1 acre condition is satisfied if land on which the project is developed and the other land (on which the assessee subsequently constructed his own residential house) was more than one acre. Thus, even assessee is agreeing that the plot area on which the project is constructed is less than one 1 acre.

18. The plot of land on which the housing project is constructed measures 70 cents. Since one acre is equivalent to 100 cents, 70 cents translates to 0.70 acres, which is less than the statutory minimum of one acre. The fact that on part of land on which personal residence is constructed, and that the combined area of both parcels exceeds one acre, does not satisfy the condition for the housing project itself. The law specifically focuses on the area of the “plot of land” for “the project,” implying the area directly attributable to the housing project for which the deduction is sought.

19. Assessee has strongly relied on the decision of the honourable Bombay High Court in case of CIT versus Vandana properties [ 19 com 316]. The principle that the area requirement pertains to the specific housing project for which the deduction is claimed has been upheld in judicial pronouncements. For instance, in the case of CIT v. Vandana Properties [2012] 19 taxmann.com 316 (Bombay), it was held that the Section 80-IB(10) deduction is allowed on the construction of a housing project on a plot having an area of one acre, irrespective of whether any other housing projects are existing on the said plot of land or not. While this case dealt with the existence of other projects, it underscores that the one-acre condition is tied to the specific housing project seeking the deduction. We find that the Hon’ble Bombay High Court does not cover issue in favour of the assessee. Though, In paragraph 24 of that judgment, the Hon’ble High Court held that section 80-IB(10)(b) prescribes the minimum size of the plot of land, and not the size of the housing project, and that the provision does not require the one-acre plot to be vacant land, but it did not held that a plot of land to comprising of more than 1 acre, in part of the area the assessee constructs its own residential house and in part of the area housing project is constructed, it satisfies the condition of the minimum plot area size of 1 acre. . In impugned case the specific plot for the housing project itself is less than one acre

20. Thus, we find no reason to upset the orders of the learned that lower authorities in denying the deduction to the assessee under section 80-IB (10) of the Act. Accordingly, we confirm the action of the learned assessing officer and the learned CIT – A in disallowing the deduction claimed by the assessee under section 80 IB (10) of the act.

21. Thus, appeal of the assessee is dismissed.

22. We now turn to the assessee’s appeal for AY 2018-19. The grounds of appeal show that, for similar reasons, the assessee’s claim for deduction under section 80-IB (10) was disallowed to the extent of 4,682,455. Since we have already held, while deciding the appeal for AY 2009-10, that the assessee is not eligible for deduction under section 80-IB(10), and as the grounds and orders of the lower authorities for the present year are on the same lines, we dismiss the assessee’s appeal for AY 2018-19 for the same reasons. Accordingly, orders of the learned lower authorities are confirmed.

23. In the result both the appeals filed by the assessee are dismissed.

Order pronounced in the open court on 16th June 2026.