Section 80IB(10) deduction and separately sanctioned amenity space cannot be clubbed with the housing project

Deduction under section 80IB(10) could not be denied merely because construction existed on reserved amenity space; the commercial-area amendment applied to the project, but eligibility depended on whether that space was properly part of the housing project. Where the amenity space was separately earmarked in the sanctioned layout and the amenity building received separate approval, it was treated as an independent project and could not be clubbed with the housing project for testing eligibility. The assessee remained entitled to deduction on the housing project, while profit attributable to the amenity building had to be excluded from the eligible deduction computation.

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Issues: (i) Whether deduction under section 80IB(10) could be denied on the footing that the amenity space formed part of the housing project and the constructed area on that space breached the commercial area restriction; (ii) whether the amenity building, separately sanctioned on the reserved amenity space, was an independent project so that its area and profit could not be clubbed with the housing project for section 80IB(10) purposes.

Issue (i): Whether deduction under section 80IB(10) could be denied on the footing that the amenity space formed part of the housing project and the constructed area on that space breached the commercial area restriction.

Analysis: The project was initially sanctioned before the relevant amendment, but the effective sanctioned plan later reflected a revised layout after additional land was acquired. The commercial-area restriction introduced in section 80IB(10) was therefore applicable to the project. However, the mere existence of construction on the reserved amenity space did not by itself justify denial of the deduction unless that area was properly treated as part of the eligible housing project.

Conclusion: The deduction could not be denied merely on the broad premise that the amendment was inapplicable or that the entire project failed automatically on account of the amenity area.

Issue (ii): Whether the amenity building, separately sanctioned on the reserved amenity space, was an independent project so that its area and profit could not be clubbed with the housing project for section 80IB(10) purposes.

Analysis: The amenity space was separately earmarked under the sanctioned layout and the building on that space received separate permission from the competent authority. On those facts, the amenity building partook the character of an independent project and could not be tagged to the housing project for testing eligibility under section 80IB(10). Since the assessee did not violate the statutory conditions in relation to the housing project, the disallowance made by the lower authorities was unsustainable. At the same time, profit attributable to the amenity building could not be included in the eligible profit for deduction.

Conclusion: The amenity building was an independent project, the assessee remained eligible for deduction under section 80IB(10) on the housing project, and the exclusion of amenity-building profit from the eligible deduction was required.

Final Conclusion: The assessee's claim for deduction was restored, with the clarification that only the housing-project profit qualified and the amenity-building profit could not be included in the deduction computation.

Ratio Decidendi: Where amenity space is separately sanctioned and the construction thereon is treated as an independent project, it cannot be clubbed with the housing project for the purpose of denying deduction under section 80IB(10).

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