Section 80HHBA- Deduction in Respect of Profits and Gains from Housing Projects in Certain Cases

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The Income Tax Act, of 1961 is the main statute of Income Tax in India. It provides for levy, administration, collection, and recovery of Income Tax.

As per Section 80HHBA,

(1) If the gross total income of an assessee of a person or a company who is a resident of India includes any profit and gain received from the execution of a housing project which is awarded to the assessee on the basis of global tender and such project is aided by the World Bank, and as per provisions of this section, it is allowed in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to—

(i) 40% thereof for an assessment year beginning on the 1 April 2001;

(ii) 30% thereof for an assessment year beginning on the 1 April 2002;

(iii) 20% thereof for an assessment year beginning on the 1 April 2003;

(iv) 10% thereof for an assessment year beginning on the 1 April 2004,

and no deduction will be allowed in respect of the assessment year beginning on 1 April 2005 and any subsequent assessment year.

(2) The deductions under this section will be allowed only if the following conditions are satisfied, namely: —

(i) If the assessee maintains separate accounts in respect of the profits and gains derived from the business of the execution of the housing project undertaken by him and, where an assessee is a person other than an Indian company or a co-operative society, such accounts should have been audited by an accountant as defined in the Explanation below sub-section (2) of section-288 and the assessee furnishes along with his return of income the report of such audit in the prescribed form17 and should have been duly signed and verified by such accountant;

(ii) an amount equal to such percentage of the profits and gains which is referred to in sub-section.

(1) in relation to the relevant assessment year is debited to the profit and loss account of the previous year in respect of which the deduction under this section is to be allowed and credited to a reserve account (to be called the Housing Projects Reserve Account) to be utilized by the assessee during a period of five years next following for the purposes of his business other than for distribution by way of dividends or profit :

Provided that where the amount credited by the assessee to the Housing Projects Reserve Account in pursuance of clause (ii) is less than such percentage of the profits and gains as is referred to in sub-section (1) in relation to the relevant assessment year, the deduction under this section will be limited to the amount so credited in pursuance of clause (ii).

(3) If at any time before the expiry of five years from the end of the previous year in which the deduction under sub-section (1) is allowed, the assessee utilizes the amount credited to the Housing Projects Reserve Account for distribution by way of dividends or profit or for any other purpose which is not a purpose of the business of the assessee, the deduction originally allowed under sub-section (1) will be deemed to have been wrongly allowed and the Assessing Officer may regardless anything contained in this Act, recomputed the total income of the assessee for the relevant previous year and make the necessary amendment and the provision of section-154 will be applied thereto, the period of four years specified in sub-section (7) of that section being reckoned from the end of the previous year in which the money was so utilized.

(4) Regardless of anything contained in any other provision of this Chapter under the heading "C.—Deduction in respect of certain incomes", no part of the income payable to the assessee for the execution of a housing project under sub-section (1) will qualify for the deduction for any assessment year under any other provision.