Section 80-IB(10)

Section 80-IB(10) — the law in short

What the courts have decided on section 80-IB(10), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Sanand Properties P Ltd v Jt CIT Supreme CourtHelps department
  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?
  No on the reopening challenge and no on the exemption. Where the assessment order shows the Assessing Officer never applied his mind to the character of the receipt at all, there is no opinion to change, and material coming out of a s.133A survey that reveals the true nature of the receipt is tangible material for s.147. On the merits the Court read Clause 7 of the AOP deed itself and held that a member's entitlement to 35% of gross sale proceeds, taken upfront and untouched by the AOP's expenses, is not a share of profit but a diversion of the AOP's receipts by overriding title, taxable in the member's hands as a business receipt. Two Revenue appeals were allowed and the assessee's appeal dismissed.
• CIT v Sarkar Builders Supreme CourtHelps taxpayer
  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?
  No. The Supreme Court held that clause (d) of section 80-IB(10), which caps the built-up area of shops and commercial establishments and took effect on 1 April 2005, does not apply to a housing project approved before 31 March 2005, even if construction was completed and profits offered to tax afterwards. The condition is inextricably linked to the approval and construction of the project, and an assessee cannot be required to satisfy a condition that was not on the statute book when the local authority sanctioned the plans. The Revenue's appeals from several High Courts were all dismissed.
• Coromondel Cabeles P Ltd v ACIT High CourtCuts both ways
  The Department has taxed my housing project income as business profit. Can I claim the section 80-IB(10) deduction now, in appeal, when I never claimed it in my return?
  Not for years governed by section 80AC. The Madras High Court held that where section 80AC applies, the deduction cannot be allowed unless the return was filed by the due date and the claim was made in it. The assessee had made no claim under section 80-IB in its return, so for assessment years 2007-08 to 2011-12 the benefit was refused, section 80AC having been inserted by the Finance Act 2006 with effect from 1 April 2006. For assessment year 2006-07 the question was answered in the assessee's favour. The Court recorded a prima facie view that the requirement may be directory, but held it could say so only under Article 226 and not in a section 260A appeal.
• CIT-25 v Vandana Properties High CourtHelps taxpayer
  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.
• CIT v Radhe Developers High CourtHelps taxpayer
  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)?
  Yes. The Gujarat High Court held that ownership of the land is not a condition of section 80-IB(10). What matters is whether the assessee developed and built the project at its own risk and cost. Here the developer took every decision, invested its own funds, engaged the agencies, bore the entire risk of profit or loss, and paid the landowner a fixed price - so it was not a works contractor. The Court added that in any event, having taken possession under a development agreement and an agreement to sell, the developer was the owner for this purpose by virtue of section 2(47)(v) read with section 53A of the Transfer of Property Act.
• CIT v Brahma Associates High CourtHelps taxpayer
  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.
• Statutory position — s.36(1)(viii): the special reserve, the twenty per cent limit, the twice-the-paid-up-capital ceiling, and the s.41(4A) charge when the reserve is drawn down CBDT Circulars & InstructionsCuts both ways
  My client is a housing finance company and has created a special reserve. How much is deductible under s.36(1)(viii), what caps it, and what happens if the reserve is later withdrawn?
  Section 36(1)(viii) allows a "specified entity" a deduction for a special reserve created and maintained by it, of an amount not exceeding twenty per cent of the profits derived from an "eligible business" computed under the head "Profits and gains of business or profession" (before any deduction under this clause) and actually carried to that reserve account. A proviso caps the cumulative benefit: where the aggregate of the amounts carried to the reserve account from time to time exceeds twice the amount of the paid up share capital and of the general reserves of the specified entity, no allowance is made in respect of the excess. And section 41(4A) supplies the sting — where the deduction has been allowed, any amount subsequently withdrawn from the special reserve is deemed to be profits and gains of business or profession and is charged to tax in the year of withdrawal, and by the Explanation to that sub-section it is charged even if the business is no longer in existence.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.