High Court allows income tax deduction on construction of housing project

High Court allows income tax deduction on construction of housing project

Rules that the size or number of projects undertaken on one acre of land is not significant

The Karnataka High Court has allowed income tax deduction on the construction of housing projects. It said that the size or number of housing projects undertaken on a minimum area of one acre of land was not significant.

The division bench of Justice S Sujatha and Justice Ravi V Hosmani held that there could be any number of housing projects. But if the housing projects fulfilled the conditions and were approved by the local authority, the deduction should not be denied to them.

(Section 80IB(10), while specifying the size of the plot of land, does not indicate the size or the number of housing projects to be undertaken on a plot having a minimum area of one acre).

As a result, the significance of the size of the plot of land was lost. Therefore, the assessee was entitled to a deduction on the construction of a housing project on a plot having an area of one acre, irrespective of the fact whether other housing projects existed or not. In those circumstances, the decision of the Income Tax Appellate Tribunal (ITAT) in rejecting the contention of the revenue regarding the size of the plot could not be faulted.

The assessee, Karavali Housing is a partnership firm engaged in the business of development of real estate and construction of residential apartments and business complexes and execution of housing projects.

The assessing officer (AO) had disallowed income tax deduction as amended by the assessee for certain assessment years. The revenue raised the issue of whether ITAT was right in allowing deduction to the assessee despite the violation of conditions contained, which stated that the housing project should be on a minimum of one-acre land.