We built one new building on land where we had already built others years ago. The officer says it is not a separate 'housing project', that our share of the plot is under one acre, and that two flats were merged. Is the s.80-IB(10) deduction gone?
Not on those grounds. The Bombay High Court held that the construction of even one building containing several residential units of not more than 1000 square feet is a 'housing project' for s.80-IB(10); that s.80-IB(10)(b) requires only that the project be on a plot of land with a minimum area of one acre and does not require the land to be vacant or to be apportioned building by building; and that the Explanation to s.80-IB(10)(a) applies only where approval for the same project is granted more than once, not to a genuinely new project on the same site. The alleged merger of two flats was rejected as a finding of fact.
Decided by the High Court (J.P. Devadhar J and A.R. Joshi J) on 2012-03-28, reported as Income Tax Appeal No. 3633 of 2009 with Income Tax Appeal No. 4361 of 2010 (Bombay High Court). It bears on section 80-IB, section 80-IB(10) of the Income Tax Act 1961, in Deductions & Disallowances matters.
Redevelopment and phased construction on an existing society plot is normal in a city, and these three objections - not a separate project, not one acre for this building, flats merged - are the standard trio in a s.80-IB(10) disallowance. This judgment answers all three, and the reasoning about not reading words into clause (b) is useful well beyond its own facts.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The assessee firm held a plot of about 2.36 acres at Kandivali (West), Mumbai. Buildings A, B, C and D were approved and constructed between 1993 and 1996, before 1 October 1998, and so were outside s.80-IB(10). In 2001 the land ceased to be surplus under the ceiling law. Building E was approved on 11 October 2002 and a commencement certificate for it issued on 10 March 2003. The assessee claimed deduction under s.80-IB(10) on the profits of building E of Rs 71,42,590 for assessment year 2004-05 and Rs 71,73,660 for 2005-06. By order dated 11 December 2005 the Assessing Officer disallowed the claim on three grounds: that building E was merely an extension of the pre-1998 project; that the land proportionate to building E was less than one acre; and that two ground floor flats had been merged so that the built-up area exceeded 1000 square feet. The Commissioner (Appeals) dismissed the assessee's appeal. The Tribunal, by orders of 29 April 2009 and 27 May 2009, allowed the deduction. The Revenue appealed.
Both appeals were disposed of, the common question being answered in favour of the assessee and against the Revenue, with no order as to costs. The construction of one building containing several residential units each not exceeding 1000 square feet is a housing project within s.80-IB(10). Clause (b) requires only that the project be on a plot of land of a minimum area of one acre; there is no requirement that the plot be vacant, nor any warrant for apportioning the plot among the buildings standing on it. The Explanation to s.80-IB(10)(a) applies only where approval is granted more than once for the same housing project and not to a distinct project approved for the first time on 11 October 2002. On the alleged merger of two flats the Tribunal's finding of fact, that no merger had occurred and neither flat had been sold, was not disturbed.
The Act does not define 'housing project', so the Court took the expression in its ordinary sense as the construction of a building or group of buildings containing residential units, and drew support from the Explanation to s.80-IB(10), which treats approval of the building plan as approval of the project. On clause (b) the Court declined to add a word the Legislature had not used: the clause speaks of a plot of land having a minimum area of one acre, and says nothing about the land being vacant or being used exclusively for the project in question. It noted that in Mumbai a wholly vacant one acre plot is rarely available and that reading in a vacancy requirement would frustrate the object of encouraging housing construction, and it referred to the CBDT letter of 4 May 2001 accepting that a further housing project on an existing site can qualify where it is separately undertaken with separate accounts and satisfies the conditions. On the Explanation to clause (a) the Court held its purpose is to fix the date of first approval where a single project is approved repeatedly, for instance on amendment during construction, and that it cannot be turned into a bar against a genuinely different project; the local authority's insistence that building E comply with objections raised against the earlier buildings imposed conditions but did not make E an extension of them.
Therefore, it is clear that construction of even one building with several residential units of the size not exceeding 1000 square feet ('E' building in the present case) would constitute a 'housing project' under Section 80IB (10) of the Act.
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Handle my notice → Ask a CA on WhatsAppNot on those grounds. The Bombay High Court held that the construction of even one building containing several residential units of not more than 1000 square feet is a 'housing project' for s.80-IB(10); that s.80-IB(10)(b) requires only that the project be on a plot of land with a minimum area of one acre and does not require the land to be vacant or to be apportioned building by building; and that the Explanation to s.80-IB(10)(a) applies only where approval for the same project is granted more than once, not to a genuinely new project on the same site. The alleged merger of two flats was rejected as a finding of fact. This was decided by the High Court (J.P. Devadhar J and A.R. Joshi J) and bears on section 80-IB, section 80-IB(10) of the Income Tax Act 1961. It is reported as Income Tax Appeal No. 3633 of 2009 with Income Tax Appeal No. 4361 of 2010 (Bombay High Court). Redevelopment and phased construction on an existing society plot is normal in a city, and these three objections - not a separate project, not one acre for this building, flats merged - are the standard trio in a s.80-IB(10) disallowance. This judgment answers all three, and the reasoning about not reading words into clause (b) is useful well beyond its own facts. If it applies to you, the first step is this: Show that the new building had its own approval, granted on or after 1 October 1998, and treat it as a project in its own right rather than as a phase of the older buildings.
The assessee firm held a plot of about 2.36 acres at Kandivali (West), Mumbai. Buildings A, B, C and D were approved and constructed between 1993 and 1996, before 1 October 1998, and so were outside s.80-IB(10). In 2001 the land ceased to be surplus under the ceiling law. Building E was approved on 11 October 2002 and a commencement certificate for it issued on 10 March 2003. The assessee claimed deduction under s.80-IB(10) on the profits of building E of Rs 71,42,590 for assessment year 2004-05 and Rs 71,73,660 for 2005-06. By order dated 11 December 2005 the Assessing Officer disallowed the claim on three grounds: that building E was merely an extension of the pre-1998 project; that the land proportionate to building E was less than one acre; and that two ground floor flats had been merged so that the built-up area exceeded 1000 square feet. The Commissioner (Appeals) dismissed the assessee's appeal. The Tribunal, by orders of 29 April 2009 and 27 May 2009, allowed the deduction. The Revenue appealed. The matter was decided on 2012-03-28 by the High Court (J.P. Devadhar J and A.R. Joshi J). On those facts the High Court held as follows. Both appeals were disposed of, the common question being answered in favour of the assessee and against the Revenue, with no order as to costs. The construction of one building containing several residential units each not exceeding 1000 square feet is a housing project within s.80-IB(10). Clause (b) requires only that the project be on a plot of land of a minimum area of one acre; there is no requirement that the plot be vacant, nor any warrant for apportioning the plot among the buildings standing on it. The Explanation to s.80-IB(10)(a) applies only where approval is granted more than once for the same housing project and not to a distinct project approved for the first time on 11 October 2002. On the alleged merger of two flats the Tribunal's finding of fact, that no merger had occurred and neither flat had been sold, was not disturbed.
The Act does not define 'housing project', so the Court took the expression in its ordinary sense as the construction of a building or group of buildings containing residential units, and drew support from the Explanation to s.80-IB(10), which treats approval of the building plan as approval of the project. On clause (b) the Court declined to add a word the Legislature had not used: the clause speaks of a plot of land having a minimum area of one acre, and says nothing about the land being vacant or being used exclusively for the project in question. It noted that in Mumbai a wholly vacant one acre plot is rarely available and that reading in a vacancy requirement would frustrate the object of encouraging housing construction, and it referred to the CBDT letter of 4 May 2001 accepting that a further housing project on an existing site can qualify where it is separately undertaken with separate accounts and satisfies the conditions. On the Explanation to clause (a) the Court held its purpose is to fix the date of first approval where a single project is approved repeatedly, for instance on amendment during construction, and that it cannot be turned into a bar against a genuinely different project; the local authority's insistence that building E comply with objections raised against the earlier buildings imposed conditions but did not make E an extension of them. In the words reproduced by the source cited on this page: "Therefore, it is clear that construction of even one building with several residential units of the size not exceeding 1000 square feet ('E' building in the present case) would constitute a 'housing project' under Section 80IB (10) of the Act." The decision followed or applied CBDT letter dated 4 May 2001 - relied upon.
It was decided by the High Court on 2012-03-28 and is reported as Income Tax Appeal No. 3633 of 2009 with Income Tax Appeal No. 4361 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, section 80-IB(10), 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. Both appeals were disposed of, the common question being answered in favour of the assessee and against the Revenue, with no order as to costs. The construction of one building containing several residential units each not exceeding 1000 square feet is a housing project within s.80-IB(10). Clause (b) requires only that the project be on a plot of land of a minimum area of one acre; there is no requirement that the plot be vacant, nor any warrant for apportioning the plot among the buildings standing on it. The Explanation to s.80-IB(10)(a) applies only where approval is granted more than once for the same housing project and not to a distinct project approved for the first time on 11 October 2002. On the alleged merger of two flats the Tribunal's finding of fact, that no merger had occurred and neither flat had been sold, was not disturbed. It arises in Deductions & Disallowances matters, on section 80-IB, section 80-IB(10) of the Income Tax Act 1961, and was decided by J.P. Devadhar J and A.R. Joshi 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. Measure the plot as a whole against the one acre test in clause (b); do not concede an apportionment of the plot between buildings, and do not accept an argument that the land had to be vacant. Keep separate books and a separate profit computation for the new project - the CBDT letter of 4 May 2001 relied on in the judgment turns on the project being separately undertaken. Where the officer alleges that flats were merged so as to exceed the built-up area limit, meet it as a question of fact: whether any merger was applied for, sanctioned, or effected, and whether the units were sold.
Still good law. A citedby search returns 107 later decisions, 14 of them from High Courts, and the judgment has been adopted outside Maharashtra. The Karnataka High Court applied it in CIT v Brigade Enterprises Ltd (22 September 2020): at para 15 the Bench set out that 'The aforesaid Circular was interpreted by Bombay High Court in COMMISSIONER OF INCOME TAX VS. VANDANA PROPERTIES supra and it was held that the housing project must be on a vacant plot of land having minimum area of one acre', rejected the Revenue's argument that the decision turned on its own peculiar facts, and concluded 'We respectfully concur with the view taken by the Bombay as well as Chennai High Courts', dismissing the Revenue's appeal. The Madras High Court had taken it up in CIT v Arun Excello Foundations Pvt Ltd (18 October 2012) and CIT v Voora Property Developers (9 March 2015), the Gujarat High Court records the Madras High Court following it in Pr.CIT v Nagjua Developers (11 June 2019), the Delhi High Court works from the same construction in CIT-VI v VRM India Ltd (18 March 2015), and its own Court continues to apply it - Pr.CIT-2 v Bhujbal Brothers Construction Company (10 December 2018) and Pr.CIT-2 v Prathamesh Constructions (1 October 2021). Four High Courts on the same side and none found on the other. Nothing overruling, doubting or confining it was found. 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.
Secondary sources cite this judgment variously at 353 ITR 36 and 353 ITR 56; neither page reference was verified against a report, so only the appeal numbers are given as certain. The Explanation to s.80-IB(10)(a), which the Court construed, took effect from 1 April 2005. 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.
Both appeals were disposed of, the common question being answered in favour of the assessee and against the Revenue, with no order as to costs. The construction of one building containing several residential units each not exceeding 1000 square feet is a housing project within s.80-IB(10). Clause (b) requires only that the project be on a plot of land of a minimum area of one acre; there is no requirement that the plot be vacant, nor any warrant for apportioning the plot among the buildings standing on it. The Explanation to s.80-IB(10)(a) applies only where approval is granted more than once for the same housing project and not to a distinct project approved for the first time on 11 October 2002. On the alleged merger of two flats the Tribunal's finding of fact, that no merger had occurred and neither flat had been sold, was not disturbed.
TaxSphere, “CIT-25 v Vandana Properties”, https://taxnotice.vittsphere.com/caselaw/case/vandana-properties-80ib10-single-building-one-acre/ (validity last checked 2026-09-07)
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