Section 80IB(10) deduction for pre-2005 housing projects upheld; later commercial-area restriction treated as prospective only.

Deduction under section 80IB(10) was available for a housing project approved before 01.04.2005 despite the presence of commercial area, because the project satisfied the substantive conditions applicable to the relevant years and the revenue's apportionment approach was not accepted. Clause (d) inserted into section 80IB(10) was treated as prospective and could not be applied to deny relief for a project approved before the amendment took effect. The disallowance of deduction was therefore reversed, and the assessee succeeded in the appeals.

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Issues: (i) Whether the assessee was entitled to deduction under section 80IB(10) of the Income-tax Act, 1961 for the relevant assessment years despite the presence of commercial area in the housing project and the dispute regarding the extent of land attributable to the residential segment; (ii) whether the insertion of clause (d) in section 80IB(10) was applicable to projects approved before 01.04.2005.

Issue (i): Whether the assessee was entitled to deduction under section 80IB(10) of the Income-tax Act, 1961 for the relevant assessment years despite the presence of commercial area in the housing project and the dispute regarding the extent of land attributable to the residential segment.

Analysis: The project had been approved prior to 01.04.2005. The controversy centred on whether the commercial component and the method adopted by the revenue authorities for apportioning land and built-up area defeated the deduction. The decision proceeded on the footing that the assessee had satisfied the substantive conditions governing deduction under section 80IB(10) as applicable to the approved project, and that the restrictive approach adopted by the lower authorities was not sustainable for the relevant years.

Conclusion: The assessee was entitled to deduction under section 80IB(10) for all the relevant assessment years.

Issue (ii): Whether the insertion of clause (d) in section 80IB(10) was applicable to projects approved before 01.04.2005.

Analysis: The amendment introducing clause (d) was treated as prospective. Since the assessee's project had been approved before 01.04.2005, the newly inserted restriction could not be applied to deny the deduction for the years under appeal.

Conclusion: Clause (d) of section 80IB(10) did not apply to the assessee's pre-01.04.2005 approved project.

Final Conclusion: The disallowance of deduction was reversed and the assessee succeeded in all the appeals.

Ratio Decidendi: An amendment imposing a new restriction on deduction under section 80IB(10) cannot be applied retrospectively to a housing project already approved before the amendment took effect.

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