Income Tax, Issue Update

Pro-rata deduction of profits and gains from business of an industrial undertaking under section 80-IB: When all conditions are not fulfilled

Case: Dy. CIT vs Shree Venkatesh Associates, Pune ITAT

Outcome: Assessee


  • The Assessee was a partnership firm engaged in the business of developing housing projects.
  • During the year under consideration, the Assessee had developed housing project by name ‘Marvilla’ at Hadapsar. The Assessee claimed an amount of Rs.11.36 Crs as deduction under Section 80-IB(10) of the Act. To verify the claim of the Assessee, the Assessing Officer referred the matter to the Valuation Officer. According to the Assessing Officer, the Valuation Officer reported the built-up area of the bungalows/ row houses to be more than 1500 sq.ft and accordingly, the said report was confronted to the Assessee.
  • Apart from the objections raised therein before the Assessing Officer the Assessee also raised an alternative plea in granting the deduction on proportionate basis. However, the Assessing Officer found the submissions made by the Assessee including the alternative plea not acceptable and held that the Assessee was not entitled to claim deduction under Section 80-IB(10) of the Act for the violations made in construction of bungalow/ row houses exceeding 1500 sq.ft.

Key points

  • The Tribunal placed reliance on the decision in the case of M/s. D.S. Kulkarni Developers Limited, wherein it was held that Assessee was entitled to claim proportionate deduction under Section 80-IB(10) of the Act relating to eligible units.
  • It was further observed that independent residential unit had to be treated as separate housing projects for the purpose of deduction under Section 80-1B(10) if other conditions were satisfied.
  • Therefore, following the same in the present facts of the case, the Assessee was allowed proportionate deduction under Section 80-IB(10) on eligible units.

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