Section 80IB(10) eligibility depends on separately sanctioned project components, not mere common layout treatment.

For section 80IB(10), independently sanctioned building plans must be tested on their own merits, and a common layout does not automatically merge separately sanctioned amenity or residential components into one ineligible project. Where the amenity spaces were separately sanctioned and independently treated, they could not be clubbed with the residential project merely because they formed part of the same overall layout. A distinct, completed portion of a larger housing scheme, such as the sanctioned parking-plus-seven-floor segment of Meghmalhar Phase-I, could qualify separately if it satisfied the statutory conditions. Notional interest disallowance on a SEBI-mandated deposit was also held unsustainable where the statute did not authorise such a deeming addition.

---

---

Issues: (i) whether deduction under section 80IB(10) was allowable in respect of DSK Sundarban where the residential buildings and amenity spaces were sanctioned separately but formed part of a common layout, (ii) whether deduction under section 80IB(10) was allowable in respect of Meghmalhar Phase-I to the extent of the buildings sanctioned for parking plus seven floors as a separate housing project, and (iii) whether the notional interest disallowance on the SEBI-mandated deposit was sustainable.

Issue (i): whether deduction under section 80IB(10) was allowable in respect of DSK Sundarban where the residential buildings and amenity spaces were sanctioned separately but formed part of a common layout.

Analysis: The residential building plans for DSK Sundarban were sanctioned separately from the amenity space plans. A common layout plan did not, by itself, determine that the amenity area formed part of the eligible housing project. The distinction between a layout plan and a building plan was material, because eligibility under section 80IB(10) had to be tested with reference to the project actually sanctioned for construction. Where the amenity buildings were independently sanctioned and separately treated, they could not be clubbed with the residential project merely because they appeared in the same overall layout. The separate sanction and independent character of the amenity spaces showed that the commercial-area objection was misplaced.

Conclusion: Deduction under section 80IB(10) was allowable for the residential project, and the amenity spaces were to be treated as independent projects; the disallowance was not justified.

Issue (ii): whether deduction under section 80IB(10) was allowable in respect of Meghmalhar Phase-I to the extent of the buildings sanctioned for parking plus seven floors as a separate housing project.

Analysis: The expression "housing project" was not confined to the entirety of all buildings shown in a larger sanctioned plan. The completed buildings for which sanction was received for parking plus seven floors constituted a distinct and independently eligible project, while the other sanctioned portions and row houses were not part of the eligible block claimed by the assessee. The law was applied by examining the specific portion for which deduction was claimed, and the fact that the claimed portion satisfied the statutory conditions was decisive. The objection based on unfinished or differently sanctioned portions of the larger layout could not defeat deduction for the eligible completed segment.

Conclusion: Deduction under section 80IB(10) was allowable for the parking plus seven floor portion of Meghmalhar Phase-I as an independent project.

Issue (iii): whether the notional interest disallowance on the SEBI-mandated deposit was sustainable.

Analysis: The disallowance was based on notional interest imputed to a deposit made in compliance with SEBI requirements. Such notional interest was not a specific expenditure contemplated by section 35D(2), and the Act did not permit importation of a deeming disallowance unsupported by the statutory text. In the absence of a finding that the deposit was not for business purposes, the addition could not stand.

Conclusion: The notional interest disallowance was unsustainable and was deleted.

Final Conclusion: The assessee succeeded on the substantive deduction claims and on the disallowance issue, while the Revenue's challenges failed; the common order resulted in allowance of the assessee's appeals and dismissal of the Revenue's appeals.

Ratio Decidendi: For section 80IB(10), independently sanctioned building plans and separately identifiable eligible portions of a larger layout must be tested on their own merits, and a common layout does not by itself merge distinct projects into one ineligible housing project.

---