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Issues: (i) Whether deduction under section 80IB(10) was allowable in respect of completed blocks of a composite housing project and whether the delay in issuance of completion certificate could defeat the claim; (ii) whether deduction had to be denied in toto because some units exceeded the prescribed built-up area; (iii) whether interest earned on margin money deposits kept for the project was eligible for deduction under section 80IB(10).
Issue (i): Whether deduction under section 80IB(10) was allowable in respect of completed blocks of a composite housing project and whether the delay in issuance of completion certificate could defeat the claim.
Analysis: The project was approved as one housing project, but the undertaking had completed a substantial part of the construction and had obtained completion-related certification for some blocks. The statutory scheme and the CBDT instruction permit deduction to be claimed on a year-to-year basis under the percentage completion method. Where the assessee had applied for issuance of completion certificate within time and the municipal authority did not reject the request within the stipulated period, the delay in formal issuance could not be attributed to the assessee. The completed blocks were treated as eligible for deduction.
Conclusion: Deduction under section 80IB(10) was allowable for the completed blocks, and the assessee succeeded on this issue.
Issue (ii): Whether deduction had to be denied in toto because some units exceeded the prescribed built-up area.
Analysis: The provision was applied on a block-wise and unit-wise basis, and the presence of ineligible flats did not require rejection of the entire project claim. The correct approach was to allow proportionate deduction for the eligible residential units satisfying the statutory size condition.
Conclusion: The disallowance could not extend to the entire claim merely because some flats were larger than the permissible limit; proportionate relief had to be granted.
Issue (iii): Whether interest earned on margin money deposits kept for the project was eligible for deduction under section 80IB(10).
Analysis: The deposits were maintained as margin money for completing the housing project, and the interest income was treated as attributable to the project and not as a detached source of income.
Conclusion: The interest income was eligible for deduction under section 80IB(10), and the assessee succeeded on this issue as well.
Final Conclusion: The common order granted full relief to the assessee by allowing the deduction on completed blocks, permitting proportionate relief for eligible units, and treating the project-linked interest income as deductible.
Ratio Decidendi: Under section 80IB(10), deduction in a composite housing project cannot be denied in entirety where eligible blocks are completed and the assessee has substantially complied with the completion requirements; ineligible units only require proportionate exclusion, and project-linked interest may also qualify where it is integrally connected with the undertaking.
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