Commencement of housing project for tax deduction depends on actual development or construction, not merely preparatory approvals and planning steps.

Preparatory steps such as a development agreement, power of attorney, preliminary sanction requests, layout submission, land conversion steps and minor expenditure did not amount to commencement of development and construction before the statutory cut-off date. The Tribunal treated such acts as preliminary in nature, noting that building permission and non-agricultural permission were granted later and that there was no material change on the land before 1 October 1998. On that basis, the housing project was held to have commenced after the specified date, and the assessee qualified for deduction under section 80-IB(10).

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Issues: Whether the assessee's housing project commenced development and construction on or after 1 October 1998 so as to qualify for deduction under section 80-IB(10) of the Income-tax Act, 1961.

Analysis: The relevant inquiry was whether the pre-1 October 1998 acts, namely the development agreement, power of attorney, application for preliminary sanction, layout submission, and small items of expenditure, amounted to commencement of development and construction. The Tribunal noted that the statutory requirement was commencement of development and construction of the housing project after the specified date. It further held that steps taken for conversion of agricultural land into non-agricultural land, preliminary permissions, and layout approvals were preparatory in nature and did not by themselves establish that construction had commenced. The record showed that the building permission was granted later, the non-agricultural permission was obtained later, and there was no material change on the land before the cut-off date. The small expenses on cleaning and pooja were treated as insufficient to show commencement of the housing project.

Conclusion: The assessee satisfied the condition that development and construction commenced after 1 October 1998 and was entitled to deduction under section 80-IB(10).

Ratio Decidendi: Preparatory steps for obtaining land-use conversion and municipal approvals do not constitute commencement of development and construction for the purpose of section 80-IB(10); the project must actually begin development or construction on or after the statutory cut-off date.

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