Section 80- IBA – Relaxation of certain conditions from 1.4.2018 – Relaxation may be effective from 1.4.2017
Issue/Justification
Under section 80-IBA, inserted by the Finance Act, 2016 from 1.4.2017, deduction of 100% of profits derived from development of affordable housing projects approved on or after 1st June 2016 is available, subject to fulfilment of specified conditions. The Finance Act, 2017 has made amendments in section 80-IBA so as to relax some of the conditions required to be fulfilled for grant of deduction. These amendments provide for:
(i) Extending period within which housing project is to be completed to five years from the date of approval;
(ii) Substituting references to “built-up area” with “carpet area” as defined in the Real Estate (Regulation and Development) Act, 2016;
(iii) Housing project located in the outskirts of metro cities (i.e. located within 25 KM periphery of municipal limits of metro cities), which were earlier required to comply with conditions applicable for housing project located in metro cities, now need to comply with less restrictive conditions as applicable to housing project located in any other place in India.
The above amendments are welcome and are likely to give a boost to affordable housing in India. However, while section 80-IBA was introduced vide Finance Act, 2016 and is effective from A.Y. 2017-18 for housing projects that are approved on or after 1st June 2016, the above amendments vide Finance Act, 2017 are being made effective only from A.Y. 2018-19.
Therefore, there is scope for litigation on the issue as to whether amended provisions will apply to projects which are approved on or after date of amendment being 1 April 2017 or also to projects approved between 1 June 2016 and 31 March 2017.
Suggestion
It is suggested that –
(i) To avoid possible litigation as also to ensure that housing projects approved prior to 1 April 2017 are treated on par with housing projects approved on or after 1 April 2017, the amendments made in the Finance Act 2017 relaxing the conditions to be fulfilled under 80-IBA for availing the benefit of deduction thereunder may be introduced with retrospective effect from the date of insertion of the section i.e. from A.Y. 2017-18.
(ii) Alternatively, CBDT may issue a clarification that housing projects approved prior to A.Y. 2018-19 in respect of which profits are earned during or after A.Y. 2018-19 will be considered for tax holiday benefit as per the amended provisions.
