Housing Project: Income from: Deduction u/s.80-IB(10): Interest on delayed payment by purchasers due from contractors and suppliers: Part of income derived from development of housing project: Entitled to deduction u/s. 80-IB(10):

The assessee was in the business of developing and building housing projects and accordingly was entitled to deduction u/s. 80-IB (10) of the Income-tax Act, 1961. The Assessing Officer made an addition of Rs. 11,05,556 ( Rs. 4.36 lakh – interest received from purchasers on delayed payments and Rs. 8.70 lakh – balances written off in case of contractors and suppliers) by way of disallowance out of the claim for deduction u/s. 80-IB(10). The Assessing Officer held that these sums did not represent the assessee’s income from the development of housing project. The CIT(A) and the Tribunal allowed the assessee’s claim and deleted the addition.

On appeal by the Revenue, the Gujarat High Court upheld the decision of the Tribunal and held as under:

“i) Interest received on delayed payments by the purchasers was part of income derived from the business of the assessee. It was entitled to special deduction u/s. 80-IB (10) in respect of the amount.

ii) During the course of the business in developing the housing project, the assessee had made payments to suppliers towards various purchases made. On such payments, the assessee would occasionally deduct sum amounts and pay the bill. The difference between the bill amount and the payment actually made would be the amount generated during the course of business. The assessee was entitled to special deduction u/s. 80-IB(10) in respect of such sum.”