My housing project was sanctioned by the municipal corporation as residential plus commercial. For years before April 2005, does that label alone cost me the section 80-IB(10) deduction?
No. The Bombay High Court held that up to 31 March 2005 the deduction under section 80-IB(10) is available to a project approved by the local authority with commercial user to the extent the Development Control Rules permit, whether the approval is labelled housing project or residential plus commercial. It also held the Special Bench was wrong to invent a 10% ceiling on commercial area for that period, since the Act imposed none, and wrong to split the deduction between residential and commercial parts, because the deduction attaches to the whole approved project. Clause (d), inserted from 1 April 2005, is prospective only.
Decided by the High Court (High Court of Judicature at Bombay - J.P. Devadhar and Mrs. Mridula Bhatkar, JJ. (judgment per J.P. Devadhar, J.)) on 2011-02-22, reported as Income Tax Appeal No.1194 of 2010 (Bombay High Court). It bears on section 80-IB(10), section 80-IB of the Income Tax Act 1961, in Deductions & Disallowances matters.
For pre-2005 projects this is the governing authority, and it disposed of the Revenue's whole line of attack in one place. It rejects the literal reading that housing project must mean residential units only, and it puts the question where it belongs - on what the local authority could and did approve under its Development Control Rules. It also turns the Revenue's own amendment against it: the word included in clause (d) shows commercial user was always an integral part of a housing project, so the 2005 amendment restricted an existing benefit rather than creating a new one. And it settles two points the Tribunal had got wrong in the taxpayer's favour anyway: courts cannot read in a 10% cap the statute does not contain, and section 80-IB(10) is a deduction on the entire approved project, not on a part of it worked out on a stand alone basis.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The assessee, a firm of builders and developers, put up a project called Brahma Estate at Pune on a plot of 34,209.79 square metres, approved by the Pune Municipal Corporation as residential plus commercial. It comprised fifteen residential buildings with a built-up area of 24,583.31 square metres and two commercial buildings with a built-up area of 7,128.87 square metres, so commercial area was 20.83% of the plot area. Work began on 14 August 2000 and finished on 3 October 2005. For assessment year 2003-04 the firm claimed deduction under section 80-IB(10) on the profits from sale of the residential units. The Assessing Officer held that housing project in section 80-IB(10) means a project of residential units only, and that since this project was approved as residential plus commercial no deduction was due. The Commissioner (Appeals) dismissed the firm's appeal. Because Tribunal benches were in conflict, a Special Bench was constituted. By order of 6 April 2009 it held that a project approved as a housing project qualified whatever the commercial percentage; that a project approved as residential plus commercial qualified only if residential built-up area was 90% or more; and that where commercial user exceeded 10% but residential profits could be worked out on a stand alone basis, deduction was allowable on the residential units alone. The Revenue appealed; several developers intervened.
The appeal was disposed of with no order as to costs, on these terms. Up to 31 March 2005, and subject to the other conditions, deduction under section 80-IB(10) is allowable to a housing project approved by the local authority having residential units with commercial user to the extent permitted by that authority's Development Control Rules; and where the commercial user is within those limits the deduction is allowable whether the approval reads housing project or residential plus commercial. The Tribunal was not justified in confining the deduction, for that period, to projects with commercial user up to 10% of the total built-up area of the plot, there being no such provision in the Act. Nor was it justified in restricting the deduction to part of the project, since section 80-IB(10) applies to the profits of the approved project as a whole; but because the assessee had not challenged that part of the Tribunal's order, the Court left it undisturbed and the deduction remained confined to the fifteen residential buildings. Clause (d), inserted with effect from 1 April 2005, is prospective and cannot be applied to earlier years.
The Court held that if a local authority could and did approve a project as a housing project with commercial user permitted by its rules, the income tax authorities cannot then say that housing project in section 80-IB(10) covers residential units only. The label on the approval is not decisive; what matters is whether the project meets the criteria for approval as a housing project. The Revenue's argument from the size limit on residential units was rejected: that limit exists to make affordable houses available to the common man, not to exclude commercial user, and it cannot curtail the local authority's power to permit commercial area under its Development Control Rules. The Court then used clause (d) against the Revenue. Clause (d) says the deduction is allowable where the commercial establishments included in the housing project do not exceed the prescribed limit; the word included shows that commercial user is an integral part of a housing project, so the 2005 amendment placed a restriction on an existing entitlement rather than conferring a new one. The Revenue's alternative case, that only projects with convenient shopping qualified before 2005, failed for the same reason - so long as the rules permit other commercial user, the tax authorities cannot confine the concession to convenient shopping. Having rejected the Revenue's basic premise, the Court held the Tribunal could not supply a 10% ceiling the Act did not contain; imposing restrictions on commercial user is for the legislature, and it did so only from 1 April 2005. On apportionment, the deduction is on profits derived from the approved project, so it is allowed on the whole or not at all. Finally, the plea for retrospective operation of clause (d) was rejected as expressly dated from 1 April 2005, as a restriction newly imposed, and as contradicting the Revenue's own case that no commercial user was permitted before that date.
Where a project fulfills the criteria for being approved as a housing project, then deduction cannot be denied under Section 80IB(10) merely because the project is approved as 'residential plus commercial'.
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Handle my notice → Ask a CA on WhatsAppNo. The Bombay High Court held that up to 31 March 2005 the deduction under section 80-IB(10) is available to a project approved by the local authority with commercial user to the extent the Development Control Rules permit, whether the approval is labelled housing project or residential plus commercial. It also held the Special Bench was wrong to invent a 10% ceiling on commercial area for that period, since the Act imposed none, and wrong to split the deduction between residential and commercial parts, because the deduction attaches to the whole approved project. Clause (d), inserted from 1 April 2005, is prospective only. This was decided by the High Court (High Court of Judicature at Bombay - J.P. Devadhar and Mrs. Mridula Bhatkar, JJ. (judgment per J.P. Devadhar, J.)) and bears on section 80-IB(10), section 80-IB of the Income Tax Act 1961. It is reported as Income Tax Appeal No.1194 of 2010 (Bombay High Court). For pre-2005 projects this is the governing authority, and it disposed of the Revenue's whole line of attack in one place. It rejects the literal reading that housing project must mean residential units only, and it puts the question where it belongs - on what the local authority could and did approve under its Development Control Rules. It also turns the Revenue's own amendment against it: the word included in clause (d) shows commercial user was always an integral part of a housing project, so the 2005 amendment restricted an existing benefit rather than creating a new one. And it settles two points the Tribunal had got wrong in the taxpayer's favour anyway: courts cannot read in a 10% cap the statute does not contain, and section 80-IB(10) is a deduction on the entire approved project, not on a part of it worked out on a stand alone basis. If it applies to you, the first step is this: Produce the sanctioned plan and the Development Control Rules and show that the commercial user was within what the local authority could permit - that, not the wording of the approval, is the test for years up to 31 March 2005.
The assessee, a firm of builders and developers, put up a project called Brahma Estate at Pune on a plot of 34,209.79 square metres, approved by the Pune Municipal Corporation as residential plus commercial. It comprised fifteen residential buildings with a built-up area of 24,583.31 square metres and two commercial buildings with a built-up area of 7,128.87 square metres, so commercial area was 20.83% of the plot area. Work began on 14 August 2000 and finished on 3 October 2005. For assessment year 2003-04 the firm claimed deduction under section 80-IB(10) on the profits from sale of the residential units. The Assessing Officer held that housing project in section 80-IB(10) means a project of residential units only, and that since this project was approved as residential plus commercial no deduction was due. The Commissioner (Appeals) dismissed the firm's appeal. Because Tribunal benches were in conflict, a Special Bench was constituted. By order of 6 April 2009 it held that a project approved as a housing project qualified whatever the commercial percentage; that a project approved as residential plus commercial qualified only if residential built-up area was 90% or more; and that where commercial user exceeded 10% but residential profits could be worked out on a stand alone basis, deduction was allowable on the residential units alone. The Revenue appealed; several developers intervened. The matter was decided on 2011-02-22 by the High Court (High Court of Judicature at Bombay - J.P. Devadhar and Mrs. Mridula Bhatkar, JJ. (judgment per J.P. Devadhar, J.)). On those facts the High Court held as follows. The appeal was disposed of with no order as to costs, on these terms. Up to 31 March 2005, and subject to the other conditions, deduction under section 80-IB(10) is allowable to a housing project approved by the local authority having residential units with commercial user to the extent permitted by that authority's Development Control Rules; and where the commercial user is within those limits the deduction is allowable whether the approval reads housing project or residential plus commercial. The Tribunal was not justified in confining the deduction, for that period, to projects with commercial user up to 10% of the total built-up area of the plot, there being no such provision in the Act. Nor was it justified in restricting the deduction to part of the project, since section 80-IB(10) applies to the profits of the approved project as a whole; but because the assessee had not challenged that part of the Tribunal's order, the Court left it undisturbed and the deduction remained confined to the fifteen residential buildings. Clause (d), inserted with effect from 1 April 2005, is prospective and cannot be applied to earlier years.
The Court held that if a local authority could and did approve a project as a housing project with commercial user permitted by its rules, the income tax authorities cannot then say that housing project in section 80-IB(10) covers residential units only. The label on the approval is not decisive; what matters is whether the project meets the criteria for approval as a housing project. The Revenue's argument from the size limit on residential units was rejected: that limit exists to make affordable houses available to the common man, not to exclude commercial user, and it cannot curtail the local authority's power to permit commercial area under its Development Control Rules. The Court then used clause (d) against the Revenue. Clause (d) says the deduction is allowable where the commercial establishments included in the housing project do not exceed the prescribed limit; the word included shows that commercial user is an integral part of a housing project, so the 2005 amendment placed a restriction on an existing entitlement rather than conferring a new one. The Revenue's alternative case, that only projects with convenient shopping qualified before 2005, failed for the same reason - so long as the rules permit other commercial user, the tax authorities cannot confine the concession to convenient shopping. Having rejected the Revenue's basic premise, the Court held the Tribunal could not supply a 10% ceiling the Act did not contain; imposing restrictions on commercial user is for the legislature, and it did so only from 1 April 2005. On apportionment, the deduction is on profits derived from the approved project, so it is allowed on the whole or not at all. Finally, the plea for retrospective operation of clause (d) was rejected as expressly dated from 1 April 2005, as a restriction newly imposed, and as contradicting the Revenue's own case that no commercial user was permitted before that date. In the words reproduced by the source cited on this page: "Where a project fulfills the criteria for being approved as a housing project, then deduction cannot be denied under Section 80IB(10) merely because the project is approved as 'residential plus commercial'."
It was decided by the High Court on 2011-02-22 and is reported as Income Tax Appeal No.1194 of 2010 (Bombay High Court). Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 80-IB(10), section 80-IB, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was disposed of with no order as to costs, on these terms. Up to 31 March 2005, and subject to the other conditions, deduction under section 80-IB(10) is allowable to a housing project approved by the local authority having residential units with commercial user to the extent permitted by that authority's Development Control Rules; and where the commercial user is within those limits the deduction is allowable whether the approval reads housing project or residential plus commercial. The Tribunal was not justified in confining the deduction, for that period, to projects with commercial user up to 10% of the total built-up area of the plot, there being no such provision in the Act. Nor was it justified in restricting the deduction to part of the project, since section 80-IB(10) applies to the profits of the approved project as a whole; but because the assessee had not challenged that part of the Tribunal's order, the Court left it undisturbed and the deduction remained confined to the fifteen residential buildings. Clause (d), inserted with effect from 1 April 2005, is prospective and cannot be applied to earlier years. It arises in Deductions & Disallowances matters, on section 80-IB(10), section 80-IB of the Income Tax Act 1961, and was decided by High Court of Judicature at Bombay - J.P. Devadhar and Mrs. Mridula Bhatkar, JJ. (judgment per J.P. Devadhar, J.). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Do not accept a 10% cap for pre-2005 years; the statute imposed no limit before clause (d). Claim on the profits of the whole approved project rather than offering to carve out the residential buildings, and note that a concession on that point cannot be undone later - the assessee here lost the benefit because it had not appealed. For assessment year 2005-06 onwards, work to clause (d) as it stood in the year - five per cent of aggregate built-up area or 2,000 square feet, whichever is lower, and after the Finance Act 2010, three per cent or 5,000 square feet, whichever is higher. Resist any attempt to apply clause (d) backwards; it is prospective.
Still good law. The full judgment was read, including the framed questions and the operative answers. What I checked is the judgment itself: it construes section 80-IB(10) as it stood before 1 April 2005 and expressly confines its ruling to that period, holding clause (d) prospective. I have not searched for any special leave petition or later Supreme Court decision, so nothing is said about that; and for assessment year 2005-06 onwards the position is governed by clause (d) as amended, not by this judgment. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The batch line names the case Brahma Associates v CIT; the cause title is the other way round, the Revenue being the appellant, and the title above follows the judgment. The Special Bench order of 6 April 2009 was not read, only the High Court's account of it. The Court recorded that the assessee had not appealed against the Tribunal's restriction of the deduction to fifteen buildings, so although it held the assessee entitled in law to the deduction on the whole project, that was not given effect to here. No reporter citations were supplied, so the appeal number is used. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was disposed of with no order as to costs, on these terms. Up to 31 March 2005, and subject to the other conditions, deduction under section 80-IB(10) is allowable to a housing project approved by the local authority having residential units with commercial user to the extent permitted by that authority's Development Control Rules; and where the commercial user is within those limits the deduction is allowable whether the approval reads housing project or residential plus commercial. The Tribunal was not justified in confining the deduction, for that period, to projects with commercial user up to 10% of the total built-up area of the plot, there being no such provision in the Act. Nor was it justified in restricting the deduction to part of the project, since section 80-IB(10) applies to the profits of the approved project as a whole; but because the assessee had not challenged that part of the Tribunal's order, the Court left it undisturbed and the deduction remained confined to the fifteen residential buildings. Clause (d), inserted with effect from 1 April 2005, is prospective and cannot be applied to earlier years.
TaxSphere, “CIT v Brahma Associates”, https://taxnotice.vittsphere.com/caselaw/case/brahma-associates-v-cit/ (validity last checked 2026-08-29)
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My housing project was sanctioned before April 2005 but finished afterwards, and the shops exceed the 5 per cent limit. Does the new clause (d) apply to me?
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My company is a member of an AOP and takes 35% of the AOP's gross sale proceeds under the AOP deed. We showed it as an exempt share of the AOP's profit. After a survey the AO reopened two years and now says it is revenue. Can he reopen, and is the money taxable in my hands?
I developed a housing project on land I had agreed to buy but never got title to, and the local authority's approval stands in the landowner's name. Can I still claim section 80-IB(10)?
