80IBA Deductions in respect of profits and gains from housing projects

[Bayyareddy DK]

Dear Sir,

My client have project in rural area where there are 22 flats less than 90Sqmts and 21 flats are more than 90Sq. Mts. Project started in May 2019 and will be completed by May 2021. All other conditions are satisfied. Is my client eligible for 80IBA for 22 flats?

Please advice

[ABHISHEK TRIPATHI]

[Housing project shall be a project which the carpet area of the residential unit comprised in the housing project does not exceed ninety square metres, where such project is located in any other place.]

So, the provision says the residential unit comprised in the housing project. That ‘comprised in’ is there to suggest that in a housing project having those residential unit not exceeding 90 sqm. will be allowed deduction (on profit/gain). The government has not used “all” before residential unit, which is to suggest that the deduction has to be seen w.r.t to residential unit and not w.r.t to housing project (only those housing project which has all residential unit not exceeding 90 sqm. seems little odd to interpret, because all is not used.)

Department might contend the above view.

Open to further discussion, as I think deduction is qua 'residential unit' not qua the 'housing project having all residential unit not exceeding 90 sqm.'

Relevant Provision as under:

Deductions in respect of profits and gains from housing projects.

S. 80-IBA. (1) Where the gross total income of an assessee includes any profits and gains derived from the business of developing and building housing projects, there shall, subject to the provisions of this section, be allowed, a deduction of an amount equal to hundred per cent of the profits and gains derived from such business.

(2) For the purposes of sub-section (1), a housing project shall be a project which fulfils the following conditions, namely:-

….....

(f) the carpet area of the residential unit comprised in the housing project does not exceed-

(i) sixty square metres, where such project is located within the metropolitan cities of Bengaluru, Chennai, Delhi National Capital Region (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurugram, Faridabad), Hyderabad, Kolkata and Mumbai (whole of Mumbai Metropolitan Region); or

(ii) ninety square metres, where such project is located in any other place;

…........

(6) For the purposes of this section,-

…...........

(d) "housing project" means a project consisting predominantly of residential units with such other facilities and amenities as the competent authority may approve subject to the provisions of this section;

(e) "residential unit" means an independent housing unit with separate facilities for living, cooking and sanitary requirements, distinctly separated from other residential units within the building, which is directly accessible from an outer door or through an interior door in a shared hallway and not by walking through the living space of another household;

S. 2(13) "business" includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture;

AI Summary

Deduction under 80IBA may apply per residential unit when unit carpet area does not exceed the prescribed limit. Deduction under section 80-IBA allows one hundred per cent of profits from developing and building housing projects provided conditions are met, notably that the carpet area of the residential unit comprised in the housing project does not exceed prescribed limits (sixty square metres in certain metropolitan areas or ninety square metres elsewhere). Definitions treat 'housing project' as predominantly residential units and 'residential unit' as an independent unit with separate facilities and direct access. The discussion suggests the deduction may be assessable by reference to individual residential units rather than requiring every unit in a project to meet the carpet-area threshold.