ITR filing within due date is mandatory for claiming deductions under section 80IB(10) : ITAT 

Real estate developers and people involved in housing projects sector often face a dilemma regarding the claiming of deductions from tax as there are a lot of compliances to be made for them. Section 80IB(10) of the Income Tax Act, 1961, is a provision aimed at incentivizing the development of affordable housing projects in India. It grants tax benefits to developers who fulfil conditions laid out in the section. To qualify, the housing project must be approved by the local authority and meet conditions regarding the size of residential units, the area of the plot, and the completion timeframe. Developers meeting these criteria are entitled to claim a deduction of a specified percentage of the profits derived from such projects from their total income. 

Ahmedabad Bench of ITAT observed that filing of Income Tax return within due date is mandatory for claiming deductions under section 80IB(10). 

What does Section 80IB(10) specifies: 

This section applies to developers engaged in the business of developing and building housing projects approved by the local authority. To avail the benefits under this section, the housing project must meet certain conditions regarding the size of the residential units, the area of the plot, and the time frame for completion. Developers who meet the conditions specified in this section are eligible to claim a deduction of a hundred percent of the profits derived from such housing projects from their total income. The deduction is allowed for a certain period, usually in the initial years of the project. The claim of deduction entirely depends upon various conditions such as the date of approval of the project, the size of residential units, the location of the project, etc., which must be met to claim the deduction. 

Issues involved : 

Case of assessee Mr. Umang Hiralal Thakkar was selected by scrutiny and a notice under section 143(2) was issued to the assesssee for AY 2007-08. Assessee had filed return of income after the due date prescribed under section 139 of the act, and he had claimed deductions under section 80IB(10) of the act. Assessing officer had disallowed the deductions under section 80IB(10) and also under section 40(a)(ia) of the act. 

Facts of the case explained: 

AO had made addition of income to assessee under section 69C. This was observed by AO on the grounds that mandatory conditions to claim deduction under section 80IB(10) were not fulfilled as per provisions mentioned in section 80AC. Primary grounds for disallowing section 80IB(10) deductions include grounds that the assessee has filed the return of income beyond the time allowed u/s. 139(1) of the Act as well as the assessee is not a developer as contemplated u/s. 

Authorised representatives of the assessee had made an appeal before CIT(A) where CIT(A) had partly allowed the appeal. Authorized Representative of assessee relied upon the decision of CIT(A) in respect of this issue and further submitted that the Assessing Officer has disallowed the said amount u/s 80IB and again disallowed the same amount u/s 69C which will amount to double taxation.  

Authorized Representative pointed out that the profit and loss account of the assessee in respect of all three parties in consideration and submitted that the opening work in progress and the expenses incurred during the year under consideration constitute cost of the project for which deduction under section 80IB(10) was claimed and the Assessing Officer has completely overlooked the fact that the it is this very amount that has been treated as income while filing return of income. Further, the confusion point was on the grounds of treatment of balance amounts from creditors, where assessee reported the same in closing working in progress whereas AO treated the same as unexplained investment.  

It is pertinent to note that books of accounts of assessee were seized during a search operation and later was provided to him. Despite this fact assessee had filed return of income along with the tax audit report. Therefore, Tribunal held that considering genuineness of the case of assessee, appeal of revenue is dismissed and appeal of assessee is partly allowed for statistical purposes. 


The present case of disallowance of deduction under section 80IB(10) sheds light on mandatory fulfilment  conditions prescribed in provisions of the act and genuineness of intentions of the assessee to complete the mandatory compliance. Since the assessee was already under scrutiny and search operations were in place for him, it was a hardship on him to fulfil all the provisions of filing ITR within due date prescribed under section 139, however he had fulfilled conditions where the tax audit report was filed within due date and a certificate in Form 10CCB was obtained by a Practicing Chartered Accountant before the return filing date. Assessee was provided with relief by ITAT to verify and submit revised claims before AO and AO was directed to re examine the facts of the case dealing with disallowance of deduction to avoid double taxation. 

About Author: 

CA Chinmay Shirish Agate 

Chinmay Agate is a Practicing Chartered Accountant having 4+ years of experience and expertise in the field of Direct Taxation and Auditing compliances. In the past, he worked in various CA firms and comes with wide industry experience from services, retail to manufacturing to trading where he has handled various complex assignments. He has keen interest in Forex and Derivative knowledge as well as fundamental analysis. 

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