Section 80-IB(10) Deduction Denied: ITAT Cochin Rules Project Plot Must Independently Meet One-Acre Minimum

Case Overview

Case Name: P.V. Hemalatha Vs CIT (ITAT Cochin)
Assessment Years: 2009-10 and 2018-19
Provision in Dispute: Section 80-IB(10) of the Income Tax Act, 1961
Decided by: Income Tax Appellate Tribunal, Cochin Bench
Order Date: 16th June 2026

The Cochin Bench of the Income Tax Appellate Tribunal (ITAT) delivered a significant ruling concerning the eligibility conditions for deduction under Section 80-IB(10) of the Income Tax Act, 1961. Two separate appeals filed by the assessee for Assessment Years 2009-10 and 2018-19 were consolidated and disposed of through a single common order, since both revolved around the identical question of whether the housing project qualified for the statutory deduction. The Tribunal ultimately ruled against the assessee on both appeals, affirming the disallowance made by the lower authorities.

Background and Facts of the Case

The assessee, an individual, was engaged in the business of developing and constructing residential apartment complexes. Her income streams included remuneration, interest on capital received from firms, and commission earned from insurance-related activities.

Assessment Year 2009-10

For Assessment Year 2009-10, the assessee filed her original return of income on 23 September 2009 declaring total income of ₹1,426,500, which was subsequently revised on 13 October 2009 to ₹2,412,180. The revised return included a claim for deduction amounting to ₹3,13,19,704 under Section 80-IB(10) of the Income Tax Act, 1961. The claim pertained to an 11-storeyed residential apartment complex constructed at Kozhikode Taluka under building permission dated 16 November 2005, with the completion certificate issued on 10 October 2008.

The original assessment under Section 143(3) was completed on 8 November 2011, determining total income at ₹2,477,180, and the deduction was allowed without dispute at that stage.

Revision Proceedings Under Section 263

The matter took a different turn when the Commissioner of Income Tax initiated revision proceedings under Section 263 of the Income Tax Act, 1961. On closer examination of the assessee's deduction claim, the Commissioner noted that while the assessee held land measuring 117.5 cents in total — comprising 44 cents in Survey No. 182/1 and 73.5 cents in Survey No. 185/1 as per document No. 639/88 — the approved housing project did not cover the entire landholding.

As per the sanctioned building plan, the total land area was 4,755.22 square metres, out of which 1,899.53 square metres had been earmarked for a proposed second phase of development. Crucially, this second phase was not included in the scope of development when the original building permit was granted. As a consequence, the actual land on which the housing project stood was found to be only 70.57 cents — well below the statutory minimum of one acre (100 cents).

The Commissioner, therefore, held that the original assessment order allowing the deduction was erroneous and prejudicial to the interests of the Revenue and directed the Assessing Officer to conduct a fresh assessment.

Fresh Assessment and First Appeal

Following the revisionary order, the Assessing Officer passed a fresh assessment order dated 23 March 2015 under Section 143(3) read with Section 263, disallowing the entire deduction of ₹3,13,19,704 on the ground that the housing project did not meet the minimum one-acre plot area requirement prescribed under Section 80-IB(10).