Housing project deduction depends on effective control and risk, while parking space cannot be counted in built-up area.

Deduction under section 80-IB(10) was available where the assessee developed and built the housing project with effective possession, control, financing, planning, execution, and commercial risk, even though the land stood in the society's name; legal ownership was not treated as essential. The project was therefore regarded as developed by a de facto owner rather than a mere contractor. On built-up area, the revenue could not rely on visual estimation alone, and parking space was excluded from the residential unit because it is not space for human habitation. The size condition was not shown to be breached, so the housing project deduction was allowed.

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Issues: (i) whether the assessee, having developed the housing project on land held in the society's name and having borne the risks and control of the project, was entitled to deduction under section 80-IB(10) of the Income-tax Act, 1961 as a developer and not merely as a contractor; (ii) whether the flats exceeded the prescribed built-up area by reason of visual estimation and inclusion of parking space.

Issue (i): whether the assessee, having developed the housing project on land held in the society's name and having borne the risks and control of the project, was entitled to deduction under section 80-IB(10) of the Income-tax Act, 1961 as a developer and not merely as a contractor.

Analysis: The agreement showed that the assessee obtained possession, arranged finance, engaged professionals, planned and executed the project, collected consideration from purchasers, and bore the commercial risk and reward. The society functioned only as a vehicle for holding title and issuing formal membership letters. Legal ownership of the land was held not to be a prerequisite for deduction where the assessee had effective control and had developed and built the housing project. The assessee was therefore treated as a developer and, on the facts, also as a de facto owner for the purpose of the deduction.

Conclusion: The issue is decided in favour of the assessee. Deduction under section 80-IB(10) could not be denied on the ground that the assessee was not the legal owner or was merely a contractor.

Issue (ii): whether the flats exceeded the prescribed built-up area by reason of visual estimation and inclusion of parking space.

Analysis: A finding on excess built-up area could not rest on a mere visual impression from the ground without actual measurement. Parking space was held not to form part of the residential unit because it is not space for human habitation, and the statutory definition of built-up area could not be enlarged beyond the items specifically included. The material relied upon by the revenue was therefore insufficient to establish breach of the size condition.

Conclusion: The issue is decided in favour of the assessee. The size condition under section 80-IB(10) was not shown to be violated.

Final Conclusion: The assessee was held entitled to the housing project deduction, and the disallowance was set aside.

Ratio Decidendi: For deduction under section 80-IB(10), the decisive test is whether the assessee has developed and built the housing project with effective control and risk, not whether it is the de jure owner of the land; in computing built-up area, only the statutory components can be counted and parking space cannot be treated as part of the residential unit.

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