Opinion Of Eminent Legal Luminaries On Controversial Issues

Housing projects – Deductions.

QUERY: If project is approved prior to June 1, 2016 and subsequent fresh approval is obtained after June 1, 2016, whether the project is eligible to claim deduction under section 80-IBA. Note: The project is surely to be completed within 3/5 years of its approval.
ANSWER: Deduction in respect of profits and gains from housing projects under section 80-IBA of the Income-tax Act, 1961 has been inserted by the Finance Act, 2016, with effective from April 1, 2017 i.e. from assessment year 2017-18.
The sub-sections (1) and (2) of the said section read as under:
"(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:–
(a) The project is approved by the competent authority after the 1st day of June, 2016, but on or before the 31st day of March, 2019;
(b) The project is completed within a period of [three] years from the date of approval by the competent authority".
The Finance Act, 2017 substitutes a period of "three" years to 'five" years in clause (b) of sub- section (2) above.
Now reading sub-section (2) it is clear that a housing project is a project which is approved by the competent authority after June 1, 2016 but before March 31, 2019. Thus, any project which has obtained fresh approval after the said date is eligible project irrespective of earlier approval. Hence, the project can claim deduction under section 80-IBA of the Act.
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Credit: Several of the queries and answers are reproduced with permission from the AIFTP Journal. We thank AIFTP for generously allowing us to host their research material.
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