The Pradhan Mantri Awas Yojana (PMAY) scheme was announced by the Central Government of India, in 2015, to achieve a dream of our Honourable Prime Minister Shri Narendra Modiji, “Housing for All” PMAY is designed to achieve its objective of “Housing for All” by 31 March 2022, the 150th birth anniversary year of Mahatma Gandhi, by constructing 20 million houses across the nation. Under PMAY, Central Government is assisting home buyers by way of CLSS (Credit Linked Subsidy Scheme ), under which they are providing interest subsidy to the home buyers. In this way they are trying to boost the affordability of houses in a inflated real estate sector.
On the other way, Central Government also helping builders/promoters by providing incentives/exemptions/deductions in direct as well in indirect taxes.
In this attempt, CBDT has inserted section 80IBA by Finance Act, 2016.The provisions of this sections are designed in such way that, it will help to achieve a goal of “Housing for All” by 31 March 2022.
The detail provisions of this sections are as follows-
This section says there will be total i.e.100% of net profits or gains, will be deducted from the gross total income of the assessee, if they are derived from a business of developing and building housing projects.
However the assessee has to fulfill certain conditions, specified under this section, to avail the deduction, which are as follows-
AND (not OR)
the project should be completed within a period of five years from the date of approval by the competent authority.(earlier it was 3 years, but now it is 5 years w.e.f.01/04/2018.)
Here both the above mentioned conditions should be fulfilled.
For the purpose of this section, “housing project” means a project consisting predominantly of residential units with such other facilities and amenities as the competent authority may approve.
In respect of a housing projects, sometimes it may seek amendment of the building plan at several stages of the construction and the same may be get approved. In such case the explanation provides that for the purpose of section 80IBA, the housing project shall be deemed to have been approved on the date on which the first approval was granted. Thus the explanation refers to the approval granted to the same housing project more than once and the said explanation would not apply where the approval is granted to different housing projects. And this was also decided with refer to Section 80IB(10) which was similar to section 80IBA, in case of CIT V Vandana Properties, Bombay high court dated 28/03/2012 .
However in case of, Pr.CIT V Shaurya infrastructure, Gujrat high Court, dated 06/12/2016, the Building Use (BU) permission was applied prior to 31/03/2012, i.e. within stipulated time by the developer, however the local authority by whatever reasons, actually granted and issued BU permission on 02/04/2012.i.e. after stipulated time. In this case, on appreciation of evidence and considering the material facts, the Gujrat high court allowed the deduction u/s80IB(10).
As well, in case of ITO V Saket Corporation, Divisional bench of Gujrat High Court (2015), only 20 units out of total 43 units were completed before stipulated time and hence, Divisional bench of Gujrat High Court, allowed proportionate deduction u/s 80IB(10) only for 20 units.
For the purpose of this section “competent authority” means the authority empowered to approve the building plan by or under any law for the time being in force.
4) The carpet area of the shops and other commercial establishments included in the housing project does not exceed three per cent of the aggregate carpet area.
For the purposes of this section, “carpet area” shall have the same meaning as assigned to it in clause (k) of section 2 of the Real Estate (Regulation and Development) Act, 2016 (16 of 2016).
As per (k) of section 2 of the Real Estate (Regulation and Development) Act, 2016 (16 of 2016) carpet area means ‘the net usable floor area of an apartment, excluding the area covered by the external walls, areas under services shafts, exclusive balcony or verandah area and exclusive open terrace area, but includes the area covered by the internal partition walls of the apartment’. In simple words, anything inside the outer walls of an apartment is nothing but is a carpet area.
5) The carpet area of the residential unit comprised in the housing project does not exceed—
(i) thirty square metres, where the project is located within the cities of Chennai, Delhi, Kolkata or Mumbai 12[***]; or
(ii) sixty square metres, where the project is located in any other place;
(iii) Upto 31/03/2018, thirty square metres, where the project is located within the cities of Chennai, Delhi, Kolkata or Mumbai or within the distance, measured aerially, of twenty-five kilometres from the municipal limits of these cities. However this clause was omitted by Finance Act 2017.
6) Where a residential unit in the housing project is allotted to an individual, no other residential unit in the housing project shall be allotted to the individual or the spouse or the minor children of such individual.
It means only a single unit should be allotted to a single family. Here Family consists of husband, wife and minor child of such individual.
For the purpose of this section, “residential unit” means an independent housing unit with separate facilities for living, cooking and sanitary requirements, distinctly separated from other residential units within the building, which is directly accessible from an outer door or through an interior door in a shared hallway and not by walking through the living space of another household.
7) The project is on a plot of land measuring not less than—
(i) one thousand square metres, where the project is located within the cities of Chennai, Delhi, Kolkata or Mumbai or
(ii) two thousand square metres, where the project is located in any other place.
8) The project is the only housing project on the plot of land.
Under section 80IB(10) there were a disputes on the number of projects on the same plot of land.For e.g. in case of CIT Vs Vandana Properties, Bombay high court dated 28/03/2012, The assessee has constructed Buildings A, B, C, D, commencing from 1993 and completed before october, 1998, on a plot of land admeasuring 2.36 acres. On the same plot assessee has taken approval for E building, which was granted on 11 oct 2002.In the present case, there are five buildings on a plot admeasuring 2.36acres, hence the proportionate area for each building is less than 1 acre.While rendering the judgment, Bombay High Court, has said, 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 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 or to be constructed, on the said plot of land or not. Section 80IB(10) while specifying the size of the plot of land, does not specify the size or number of housing projects that are required to be undertaken on a plot having minimum area of one acre.
To avoid such kind of disputes, Section 80IBA specifically says that the project is the only housing project on the plot of land.
9) The project should utilize,
(i) not less than ninety per cent of the floor area ratio permissible in respect of the plot of land under the rules to be made by the Central Government or the State Government or the local authority, as the case may be, where the project is located within the cities of Chennai, Delhi, Kolkata or Mumbai, or
(ii) not less than eighty per cent of such floor area ratio where such project is located in any place other than the place referred to in sub-clause (i).
“floor area ratio” means the quotient obtained by dividing the total covered area of plinth area on all the floors by the area of the plot of land.
10) The assessee should maintain separate books of account in respect of such housing project.
Separate books of accounts is to be maintained, so as to ensure that correct profits are ascertained.
As this section allows 100% deduction on profits and gains derived by an undertaking engaged in developing and building housing projects approved by local authority.
The object of granting 100% deduction was to promote house building activity so as to provide affordable housing units to a common man.
11) The provisions of this section shall not apply to any assessee who executes the housing project as a works-contract awarded by any person (including the Central Government or the State Government).
12) Where any amount of profits and gains derived from the business of developing and building housing projects is claimed and allowed under this section for any assessment year, deduction to the extent of such profit and gains shall not be allowed under any other provisions of this Act.
13) If the housing project is not completed within the stipulated period specified under this section, (i.e. five years), in respect of which a deduction has been claimed and allowed under this section, then the total amount of deduction so claimed and allowed in one or more previous years, shall be deemed to be the income of the assessee chargeable under the head “Profits and gains of business or profession” of the previous year in which the period for completion so expires.
So to claim deduction under section 80IBA is not a easy task but to fulfill all the conditions specified in the section.