Housing project: Deduction u/s. 80IB(10): A. Y. 2006-07: Ceiling on commercial area inserted w.e.f. 01/04/2005 in section 80-IB(10(d) does not apply to projects approved before that date:

The assessee’s housing project commenced prior to 01/04/2005, when section 80-IB(10) of the Incometax Act, 1961 did not impose any ceiling on the commercial area that could be embedded in the project. For the A. Y. 2006-07, the Assessing Officer denied deduction u/s. 80-IB(10) relying on the ceiling prescribed in section 80-IB(10) as amended by the Finance (N0.2) Act, 2004 w.e.f. 01/04/2005. The Tribunal upheld the decision of the Assessing Officer.

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

 “i) The judgment of the Bombay High Court in Brahma Associates 333 ITR 280 (Bom) holding that w.e.f. 01/04/2005, deduction u/s. 80-IB(1)) would be governed by the restriction on the commercial area imposed by clause (d) does not mean that even projects approved prior to 01/04/2005 would be governed by the said restriction.

ii) Neither the assessee nor the local authority responsible to approve the construction projects are expected to contemplate future amendment in the statute and approve and/or carry out constructions maintaining the ratio of residential housing and commercial construction as provided by the amended Act.

iii) The entire object of section 80-IB(10) is to facilitate the construction of residential housing project and if at the stage of approving the project, there was no such restriction in the Act, the restriction subsequently imposed has to be necessarily construed on the prospective basis
and as applying to the projects approved after that date.”