Redevelopment revenue recognition: section 43CB, Ind AS 115 and MAT

This is Part 3 of a three-part study of how a developer is taxed on a redevelopment project. Part 1 covers the four scheme types and the characterisation of what the developer acquires and gives. Part 2 covers what the developer pays the members, as cost or capital, and withholding on each. Part 3 covers when the income is recognised, the minimum tax and the slum-scheme deductions.

Most redevelopment disputes about income are disputes about the year. The Assessing Officer rarely says that a developer’s profit on a completed project is wrong in total. He says it should have been taxed earlier: on a percentage of completion when the developer waited for completion, on TDR when it was sold rather than when the rehab block was finished, on the rehab flats when they were handed over rather than when the free-sale flats were sold. The developer’s answer is usually that the profit is the same either way and the Revenue loses nothing but time. The courts have treated that answer, revenue neutrality, as powerful but not conclusive, and the provisions that now govern recognition, section 145, the income computation and disclosure standards and section 43CB, were written partly to take the choice of method away from the assessee.

For a company the timing question has a second dimension. The minimum alternate tax is computed on book profit, which follows the accounts, and the accounts follow the Guidance Note or Ind AS 115 rather than the Act. A developer can therefore be taxed on a profit its books recognise in a year in which its normal computation recognises none, or the reverse. The transition from Indian accounting standards to Ind AS, and the later adoption of Ind AS 115, produced very large adjustments to retained earnings for real estate companies, and whether those adjustments enter book profit is a live question.

Key points

• No income computation and disclosure standard has been notified for real estate developers. The Board’s FAQs of 23 March 2017 say that the relevant provisions of the Act and the standards apply “as may be applicable”.
• Section 43CB mandates percentage of completion for a construction contract. The Ahmedabad Tribunal in Aaryan Buildspace and Vyapti Enterprise and the Chennai Tribunal in BSR Builders held that it does not reach a developer. In redevelopment the Revenue can argue that the rehab component built for a society is a construction contract. That argument is undecided.
• A developer may follow project completion or percentage of completion. The Supreme Court in Bilahari Investment and the Delhi and Gujarat High Courts protect a method consistently followed unless it distorts profits.
• The 2012 Guidance Note covers redevelopment expressly and applies percentage of completion only when all its paragraph 5.3 thresholds are met together.
• Ind AS 115 measures non-cash consideration, including development rights, at fair value, and generally moves Indian developers to recognition at a point in time.
• Section 115JB(2A) is the recurring adjustment for items in other comprehensive income. The transition amount on first adoption of Ind AS is spread over five years under section 115JB(2C). The Ind AS 115 reversal by a company already on Ind AS falls outside (2C); the Delhi Tribunal allowed DLF’s deduction of it in October 2025 without discussing (2C).
• The section 80-IB(10) slum proviso relaxes only clauses (a) and (b). The Bombay High Court upheld a notification limiting its period in January 2025; a later Tribunal decision went the other way without citing it.
• Under the Income-tax Act, 2025 the minimum alternate tax rate is fourteen per cent in section 206, and the credit position is treated in the affordable housing article.

Why timing is the whole dispute

The arithmetic of a redevelopment project is fixed by the end. Revenue from the free-sale units, FSI and TDR, less the cost of the scheme including the rehab component and the payments to members, is the profit. What the methods of accounting decide is how that profit is spread across the years of the project.

Under the project completion method the developer recognises revenue and cost when the project, or a unit, is complete and the significant risks and rewards have passed to the buyer. In a redevelopment of three to five years, nothing is recognised until the end, and a developer selling free-sale units off-plan carries the advances received as liabilities in the meantime.

Under the percentage of completion method the developer recognises revenue and cost progressively, in proportion to the stage of completion, once a threshold of progress and sales has been reached. Income arises earlier, and if the developer later fails to complete or sales collapse, earlier income may have to be reversed.

In redevelopment the choice has two features absent from an ordinary project. The rehab component is often built first, because members must be rehoused before the free-sale area can be sold or occupied, so the stage of completion measured by cost can be high while the free-sale revenue secured by contracts is low. And in a slum scheme the output is partly TDR, released in stages, whose recognition has its own case law, described in Part 1.

Section 145, the income computation and disclosure standards, and the Board’s answer for developers

Section 145(1) computes business income “in accordance with either cash or mercantile system of accounting regularly employed by the assessee”. Section 145(2), in the form substituted by the Finance (No. 2) Act, 2014 with effect from 1 April 2015, provides that “the Central Government may notify in the Official Gazette from time to time income computation and disclosure standards to be followed by any class of assessees or in respect of any class of income”. Section 145(3) allows the Assessing Officer to make a best judgment assessment where he is not satisfied about the correctness or completeness of the accounts, where the method of accounting has not been regularly followed, or where “income has not been computed in accordance with the standards notified under sub-section (2)”. The rejection of books under section 145(3) is the subject of its own provision page.

The notification. By Notification 87 of 2016, dated 29 September 2016, the Central Government notified ten standards “to be followed by all assessees (other than an individual or a Hindu undivided family who is not required to get his accounts of the previous year audited in accordance with the provisions of section 44AB of the said Act) following the mercantile system of accounting”, for the heads business income and income from other sources, applicable from assessment year 2017-18. Each standard is “applicable for computation of income chargeable” under those heads “and not for the purpose of maintenance of books of account”, and provides that in a conflict “the provisions of the Act shall prevail to that extent”.

ICDS III and ICDS IV. ICDS III, on construction contracts, “should be applied in determination of income for a construction contract of a contractor”, and defines a construction contract as “a contract specifically negotiated for the construction of an asset or a combination of assets that are closely interrelated or interdependent in terms of their design, technology and function or their ultimate purpose or use”. Its paragraph 20 provides that “the early stage of a contract shall not extend beyond 25 % of the stage of completion”, and its transitional provisions allow contracts commenced on or before 31 March 2016 and not completed by then to be recognised “based on the method regularly followed by the person prior to the previous year beginning on the 1st day of April, 2016”. ICDS IV, on revenue recognition, deals with the sale of goods, the rendering of services and the use by others of the person’s resources, and “does not deal with the aspects of revenue recognition which are dealt with by other” standards. Neither standard contains an exclusion for real estate developers.

ICDS II and section 145A. A developer’s work in progress is inventory, and ICDS II on valuation of inventories governs it. Its scope paragraph excludes “work-in-progress arising under ‘construction contract’ including directly related service contract which is dealt with by the Income Computation and Disclosure Standard on construction contracts”, but not a developer’s own stock. Paragraph 3 provides that “inventories shall be valued at cost, or net realisable value, whichever is lower”, and paragraph 9 that where a process produces more than one product simultaneously and the costs of conversion of each are not separately identifiable, “the costs shall be allocated between the products on a rational and consistent basis”. Section 145A, substituted by the Finance Act, 2018 with effect from 1 April 2017, requires inventory to be valued at the lower of actual cost and net realisable value computed in accordance with the standards. That framework puts the rehab cost and the payments to members inside the cost of the developer’s stock, which is the developer’s position in Part 2, and supplies the statutory footing for allocating common cost between free-sale units and TDR. It also gives the Assessing Officer a line of inquiry where a rehab-heavy project is written down to net realisable value: a write-down is allowable only if net realisable value, being the estimated selling price less the costs of completion and sale, is genuinely below cost.

The Board’s answer. The Board issued FAQs on the standards as Circular 10 of 2017 on 23 March 2017. Question 12 asked whether ICDS III and ICDS IV should be applied by real estate developers, noting that there is no specific scope exclusion for them. The answer was: “At present there is no specific ICDS notified for real estate developers, BOT projects and leases. Therefore, relevant provisions of the Act and ICDS shall apply to these transactions as may be applicable.” The circular on the Department’s site is a scanned image without a text layer, so this text is taken from the Delhi Tribunal’s quotation in DLF Limited in October 2025 and from two published reproductions that agree word for word.

The answer resolves nothing. It says that something applies “as may be applicable” without saying what. Tribunals have read it in different ways. In BSR Builders, discussed below, the Chennai Tribunal read it as making ICDS III inapplicable to developers. In Bengal Peerless Housing Development Co. Ltd. v. DCIT, ITA 317/Kol/2022, decided on 1 March 2023 for assessment year 2019-20, the Kolkata Tribunal held at paragraph 11.4 that because no standard is notified for developers, revenue and cost recognition “is governed by the applicable accounting standards and Ind AS”. Both readings lead to the same practical result: a developer is not bound by ICDS III’s percentage of completion merely by being a developer.

The Delhi High Court and the Finance Act, 2018. In Chamber of Tax Consultants v. Union of India, W.P.(C) 5595 of 2017, decided on 8 November 2017, the Delhi High Court struck down parts of several standards, including paragraph 10(a) and paragraph 12 of ICDS III and, as reported, the part of paragraph 6 of ICDS IV that permitted only the proportionate completion method for services. The judgment’s paragraph numbering is taken from a published copy rather than the Court’s own, and should be read with that caution. Parliament responded in the Finance Act, 2018, inserting section 43CB by section 15 of that Act, “deemed to have been inserted with effect from the 1st day of April, 2017”, and, by section 47, substituting new sections 145A and 145B for section 145A from the same date.

The Income-tax Act, 2025. Section 276(2) corresponds to section 145(2), dropping the words “in the Official Gazette from time to time”, and section 276(3)(c) to the third limb of section 145(3). No re-notification of the standards under section 276(2) or under the Income-tax Rules, 2026 was found. They continue through the savings clause in section 536(2)(j), under which any notification “issued under any provision of the repealed Income-tax Act shall, so far as it is not inconsistent with the corresponding provisions of this Act, be deemed to have been … issued under the corresponding provision of this Act and shall continue in force accordingly”. The standards are the subject of the income computation and disclosure standards provision page.

Section 43CB: does it reach a redevelopment developer?

The provision. Section 43CB(1) provides that “the profits and gains arising from a construction contract or a contract for providing services shall be determined on the basis of percentage of completion method in accordance with the income computation and disclosure standards notified under sub-section (2) of section 145”, with a single proviso under which service contracts of not more than ninety days follow project completion and service contracts involving an indeterminate number of acts follow the straight line method. Sub-section (2) provides that for these methods “the contract revenue shall include retention money” and “the contract costs shall not be reduced by any incidental income in the nature of interest, dividends or capital gains”. The counterpart in the Income-tax Act, 2025 is section 57, headed “Revenue recognition for construction and service contracts”, whose sub-section (1) refers to the standards notified under section 276(2), with the proviso recast as sub-section (2). The section is the subject of its own provision page.

The authority that it does not reach a developer. In DCIT v. Aaryan Buildspace LLP, ITA 1204/Ahd/2024, decided on 7 March 2025 for assessment year 2018-19, the Ahmedabad Bench held at paragraph 8.2 that a developer “does not fall within the ambit of Section 43CB of the Act”. The same Bench followed it in Vyapti Enterprise v. ITO, ITA 835/Ahd/2024, decided on 3 July 2025 for the same year. In BSR Builders Engineers Contractors, ITA 1274, 1311, 1312 and 1561/Chny/2025, decided on 14 January 2026 for assessment year 2017-18, the Chennai Bench held at paragraph 40 that section 43CB read with ICDS III applies “to contractors and not developers”, and at paragraph 38 that projects begun before 1 April 2016 keep their old method under the transitional provision. BSR Builders misquotes the transitional provision at paragraph 37 as applying to contracts commenced “on or after” 31 March 2016, when the standard says “on or before”, and should be cited with care. Aaryan Buildspace also said at paragraph 8.3 that the Guidance Note requires developers to “follow AS-9, not AS-7”, a simplification of the Guidance Note, which applies the principles of AS 9 to sales that are in substance like the delivery of goods and percentage of completion where the substance is that of a construction contract; the holding on section 43CB does not depend on it.

These decisions rest on a sound textual foundation. A developer that builds flats on land it controls and sells them to buyers does not have “a contract specifically negotiated for the construction of an asset” with anyone; it has contracts of sale, under which the asset is delivered complete. The Delhi High Court made the same distinction before section 43CB existed, in Paras Buildtech India Pvt. Ltd. v. CIT, ITA 602 and 603/2015, decided on 18 November 2015 for assessment years 2005-06 and 2006-07, treating as significant, at paragraph 16, the unchallenged finding of the Commissioner (Appeals), upheld by the Tribunal, that the assessee was only a developer and not a contractor, so that Accounting Standard 7 on construction contracts did not apply.

The Revenue’s argument in redevelopment. Redevelopment gives the Revenue an argument that an ordinary project does not. The rehab component is built on the society’s land, for the society and its members, to a specification the development agreement fixes: carpet areas, amenities, materials, completion period, and in Gujarat a penalty for delay and often a bank guarantee. That looks very like “a contract specifically negotiated for the construction of an asset”. The consideration is not cash but development rights, and nothing in the definition requires cash. On this view the developer has two businesses on the same plot: a construction contract for the society, to which section 43CB mandates percentage of completion on the rehab component, and a sale business on the free-sale component, to which it does not apply.

The developer’s answer. The development agreement is a single bargain under which the developer acquires the right to build and sell in return for rehousing the members. The rehab flats are not built for a price; they are the price. Splitting one project into two methods was rejected by the Tribunal in Chembur Trading Corporation in 2009, in the slum context, where, according to a published summary, the Assessing Officer was held unable to “adopt two methods of accounting in one project”. And treating the rehab component as a construction contract would produce an absurd computation: contract revenue equal to the fair value of development rights that the developer then holds as stock, giving profit on the rehab component in proportion to its completion while the free-sale component, on which the real profit is made, is still unbuilt. The ICDS III definition also refers to “a construction contract of a contractor”, and a developer acting on its own account is not a contractor for anyone.

Where it stands. The Ahmedabad and Chennai decisions concern ordinary developers, not redevelopment, and none addresses the rehab component argument. The point is open. A developer that follows project completion on a redevelopment should expect the argument and should be able to show that the agreement is a single bargain, that the rehab component is not separately priced, and that its accounting treats the project as one.

Project completion against percentage of completion: what the courts protect

A developer outside section 43CB chooses its method under section 145(1), and the question becomes when the Assessing Officer may displace it.

The Supreme Court. In CIT v. Bilahari Investment (P) Ltd., Civil Appeal 1625 of 2008 and connected appeals, decided on 27 February 2008 and reported at (2008) 299 ITR 1, a case about chit fund subscribers and not real estate, the Court explained at paragraph 16 that “under completed contract method, the revenue is not recognised until the contract is complete” and at paragraph 17 that percentage of completion “tries to attain periodic recognition of income in order to reflect current performance”. It held at paragraph 19 that “the entire exercise is revenue neutral”, and at paragraph 20 that “every assessee is entitled to arrange its affairs” and follow an accepted method, the Department being entitled to insist on another only where it “records a finding that the method adopted by the assessee results in distortion of profits”.

The High Courts. The Delhi High Court applied that to developers in CIT (Central)-I v. Manish Build Well Pvt. Ltd., ITA 928 of 2011, decided on 15 November 2011, holding at paragraph 8 that “it is well settled that the project completion method is one of the recognized methods of accounting” and at paragraph 9 that adopting percentage of completion “for one year … on selective basis” would distort profits. The phrase sometimes attributed to that judgment, that project completion is “the only method suitable for any developer”, is the Commissioner (Appeals)’ wording recorded by the High Court at paragraph 6, not the High Court’s own holding. In Paras Buildtech the Delhi High Court held at paragraph 19 that project completion is a recognised method consistently followed and at paragraph 22 that “there was no actual loss to the revenue”, and in CIT v. DLF Universal Ltd., ITA 159 and 326 of 2010, decided on 21 December 2016, it held at paragraph 15 that a change of method “ipso facto could not have resulted in loss of revenue”. The Karnataka High Court in CIT v. Prestige Estate Projects Pvt. Ltd., ITA 84 of 2010, decided on 5 May 2020, relied on Bilahari and on the developer’s own later move to percentage of completion.

Gujarat. In ITO v. Mahalaxmi Builders, Tax Appeals 1163 and 1164 of 2010, decided on 5 September 2011, the Gujarat High Court dismissed the Revenue’s appeals where project completion had been accepted for the same project in an earlier year, holding at paragraph 6 that discarding it “would lead to anomalous situation”. Paras Buildtech in turn relied on a Gujarat High Court decision cited as CIT v. Shivalik Buildwell, (2013) 40 taxmann.com 219, whose own text could not be located. In DCIT v. Sylvannus Builders and Developers Ltd., ITA 1923/Ahd/2019, decided on 8 May 2023 for assessment year 2015-16, the Ahmedabad Bench accepted the percentage of completion actually followed, at 46.64 per cent complete, and deleted the Assessing Officer’s estimate of margin because the books had never been rejected under section 145(3). Two further Ahmedabad decisions uphold project completion. Vyapti Enterprise, already mentioned, deleted an addition made by applying percentage of completion to a developer. In Ambrosia Realty v. ITO, ITA 2043/Ahd/2024, decided on 27 August 2025 for assessment year 2016-17, the Bench held that the Guidance Note’s paragraph 5.3 parameters are indicators of certainty of outcome only, and that the Revenue must also establish that the project is in economic substance a construction contract before percentage of completion can be imposed (paragraphs 23 and 25). No Gujarat High Court decision squarely deciding project completion against percentage of completion for a builder as a question of law was traced.

Bombay. The Bombay High Court’s orders are short and fact-bound. In Pr. CIT v. Kolte Patil Developers Ltd., ITA 838 of 2016, decided on 11 February 2019, a section 80-IA case, the Court held at paragraph 5 that because the assessee “was following Percentage Completion Method and not Project Completion Method” it had to book revenue in the year, and it is reported to have been followed in Pr. CIT v. Kumar Urban Development on 16 July 2025, though that order was not read. In Pr. CIT v. Runwal Multihousing Pvt. Ltd., ITA 953 of 2021, decided on 20 November 2025, a change from percentage of completion to project completion was held bona fide on the facts, raising no substantial question of law. In Pr. CIT v. Anshul Siddhi Promotors and Builders, ITA 219 of 2024, decided on 19 June 2026, the appeal failed on its facts; a list of authorities in that order cites a decision as “299 ITR 1 (Bom)”, but 299 ITR 1 is Bilahari, so that citation should not be repeated.

The Revenue’s argument. Revenue neutrality is a good answer where the rate of tax is constant and the assessee survives to pay. It is not a complete answer where the rate changes, where a deduction is time-limited, where the developer is a special purpose entity wound up after the project, or where the minimum tax is computed on a different basis. In redevelopment, a developer that sells most of its free-sale area off-plan in the first two years and completes in the fifth may hold very large advances on which no tax is paid for years. Bilahari itself recognises that the Department may insist on a method where the one followed distorts profits, and Kolte Patil shows that a developer that has actually followed percentage of completion cannot resile from it selectively. The developer’s protection is consistency, not the method as such.

Credit for tax deducted by buyers. A developer on project completion receives instalments from free-sale buyers who deduct one per cent under section 194-IA, often for years before any income is recognised. Rule 37BA(3)(i) of the Income-tax Rules, 1962 gives credit “for the assessment year for which such income is assessable”, and clause (ii) spreads it, where income is assessable over several years, “in the same proportion in which the income is assessable to tax”. The credit therefore waits for recognition. A developer should reconcile the tax credit statement against its advances every year and claim the credit in the year the income is recognised, so that it does not lapse or stand mismatched.

The 2012 Guidance Note: redevelopment expressly in scope

The Institute of Chartered Accountants of India’s Guidance Note on Accounting for Real Estate Transactions (Revised 2012) governs entities that do not report under Ind AS. It is accounting guidance, not law, but it decides what the books show, and the books are where the Assessing Officer starts.

Scope. Paragraph 1.2 brings within it “(e) Redevelopment of existing buildings and structures” and “(f) Joint development agreements”. Paragraph 1.5 applies it to “all projects in real estate which are commenced on or after April 1, 2012” and to earlier projects first recognising revenue on or after that date.

Percentage of completion, and its gates. The Guidance Note does not require percentage of completion for every project. As reproduced in Ambrosia Realty, it applies the principles of AS 9 to transactions that are in substance similar to the delivery of goods, and percentage of completion to transactions “which have the same economic substance as construction contracts” (paragraphs 3.3 and 5.1). Where percentage of completion applies, paragraph 5.3, as reproduced in Supreme High Spaces, sets the conditions, of which the three quantitative ones are: (b) “a reasonable level of development is not achieved if the expenditure incurred on construction and development costs is less than 25 % of the construction and development costs”, excluding land; (c) “atleast 25% of the saleable project area is secured by contracts”; and (d) “atleast 10% of the contract consideration as per the agreements of sale or any other legally enforceable documents are realised at the reporting date in respect of each of the contracts”, a test applied contract by contract (Ambrosia Realty’s reproduction reads “total revenue” for “contract consideration”; the ICAI text itself was not read). Until all are met, no revenue is recognised.

Rehab cost. Paragraph 2.2(a) includes “rehabilitation costs” in the cost of land and development rights, which is the accounting basis for the treatment of member payments in Part 2. Paragraph 7.2 provides that “where development rights are acquired by way of giving up of rights over existing structures or open land, the development rights should be recorded either at fair market value or at the net book value of the portion of the asset given up whichever is less”.

The thresholds in the Tribunal. Assessing Officers have used paragraph 5.3 to accelerate income. In Supreme High Spaces LLP v. NaFAC, ITA 4431/Mum/2023, decided on 7 November 2024 for assessment year 2018-19, the Mumbai Tribunal, quoting at paragraph 13 the coordinate Bench’s holding in Reliable Builders & Developers, ITA 4205/Mum/2023, decided on 30 September 2024, that the conditions “are required to be fulfilled simultaneously and in toto”, held that with about 11.74 per cent of area sold the twenty-five per cent condition was not met and the addition was unsustainable. The Ahmedabad Bench went further in Ambrosia Realty, holding that the parameters are indicators of certainty of outcome only and that the Revenue must first establish construction-contract substance (paragraphs 23 and 25).

Redevelopment and the thresholds. The cost threshold in paragraph 5.3(b) is measured on construction and development costs excluding land. In a redevelopment the rehab construction is a construction cost, so a developer that builds the rehab block first may cross the twenty-five per cent cost threshold early, while the free-sale contracts and collections lag behind. The Revenue’s argument is that the rehab cost should count towards the stage of completion of the whole project. The developer’s argument is that the rehab cost is in substance the cost of acquiring the land, which paragraph 5.3(b) excludes, so it should not count towards the stage of completion at all. The Guidance Note’s own paragraph 2.2(a), which puts rehabilitation costs in the cost of land and development rights, supports the developer. The point has not been decided.

Interest, borrowing costs and section 43B on a long project

A redevelopment developer funds rent, corpus and the rehab block for years before a free-sale unit is delivered, usually on borrowed money. How the interest is treated changes the year of deduction by several years.

The Revenue’s argument. ICDS IX on borrowing costs defines a “qualifying asset” to include “inventories that require a period of twelve months or more to bring them to a saleable condition”, and requires borrowing costs attributable to a qualifying asset to be capitalised. A redevelopment project’s free-sale inventory almost always takes longer than twelve months, so on this argument the interest belongs in work in progress and is deducted only when the units are recognised.

The developer’s argument. Section 36(1)(iii) allows interest on capital borrowed for the purposes of the business, and its proviso postpones only interest on capital borrowed for the acquisition of an asset, until the asset is first put to use, and the Tribunal in Triple Securities held that it does not reach stock in trade. The standards themselves provide that the Act prevails where they conflict. The Delhi High Court in CIT v. Gopal Das Estates & Housing Pvt. Ltd., ITA 210 of 2003 and connected appeals including ITA 2078 of 2010, decided on 20 March 2019, approving at paragraph 70 the Tribunal’s reliance on the Bombay High Court’s decision in CIT v. Lokhandwala Construction Industries Ltd., (2003) 260 ITR 579, and applying AS 2 to an assessee following the completed contract method, held at paragraph 71 that interest after completion of the project “cannot be attributed to work” and “had to be allowed only as revenue expenditure”. Triple Securities and Sunteck Realty, discussed in Part 2, are to the same effect for interest after the occupancy certificate and for interest decapitalised on adoption of Ind AS 115.

Where it stands. Interest after completion is allowable in the year on the High Court authority. Whether ICDS IX can defer interest during construction that section 36(1)(iii) would otherwise allow has not been decided in a redevelopment, and the answer turns on whether the standard is in conflict with the section or merely supplements it.

Section 43B. Premium, scrutiny fees and other charges payable to the planning authority, MHADA or the slum authority are often accrued and carried in work in progress before they are paid. Where such a sum falls within section 43B, the Revenue can argue that its deduction is deferred until payment even though it sits inside inventory. The developer’s answer is that section 43B regulates when a deduction is allowed, not how closing stock is measured, so an accrued but unpaid charge carried in work in progress is not “allowed” as a deduction until the stock is charged to cost. No decision on the point was traced.

TDR and the method of accounting in a slum scheme

In a slum scheme the method of accounting decides not only when the free-sale units are taxed but when the TDR is taxed, and the two questions interact.

Under project completion, the developer’s position is the majority Mumbai view described in Part 1: TDR released and sold before completion is carried as an advance or set against work in progress, and the profit is recognised when the scheme is complete, with the rehab cost set against it. The Tribunal accepted that in Skylark Build, Videocon Atithi Shelters, Pushpa Construction and Aristo Shelters, and the protection comes from Bilahari’s principle that a recognised method consistently followed is not displaced without a finding of distortion.

Under percentage of completion, the developer recognises the TDR revenue progressively with the rest of the scheme. In DBS Realty the Tribunal accepted that TDR sales of Rs 53.35 crore could be held as a liability and recognised under percentage of completion, quashing a revision order that sought to tax them on sale.

The Revenue’s position in either case is the minority view in Shivshahi Punarvasan Prakalp: TDR released is a completed asset, its sale is final, and the profit accrues on sale under the mercantile system, whatever method the developer applies to its flats. The strength of that argument depends on the facts. Where the TDR is sold outright, the price is received and nothing remains to be done for the buyer, the analogy with a completed sale is close. Where the developer’s right to further TDR depends on completing the rehab construction and the TDR already released can be clawed back if it does not, the analogy fails.

For a Gujarat scheme, the same analysis applies to transferable floor space index under the 2016 public housing guidelines and the slum regulations, which, as reported, allow unused floor space to become a transferable right. No Gujarat decision on the timing of income from transferable floor space index was traced.

Ind AS 115: point in time, and non-cash consideration

A developer that is a company within the Ind AS roadmap reports under Ind AS 115, Revenue from Contracts with Customers, notified by the Companies (Indian Accounting Standards) Amendment Rules, 2018 and applicable from 1 April 2018. The Guidance Note does not apply to it.

Over time or at a point in time. Ind AS 115 recognises revenue over time only where the entity’s performance meets one of the criteria in paragraph 35, the one relevant to real estate being, in substance, that the performance creates an asset with no alternative use to the entity and the entity has an enforceable right to payment for performance completed to date. Indian sale agreements have usually not given the developer an enforceable right to payment for work done to date if the buyer withdraws, so most Indian developers moved on adoption to recognising revenue at a point in time, on handover. The paragraph is described here rather than quoted, because the notified text was not read in the Gazette.

The rehab component may be the exception. Paragraph 35(b) of Ind AS 115, as reproduced in published copies of the standard, recognises revenue over time where the entity’s performance “creates or enhances an asset (for example, work in progress) that the customer controls as the asset is created or enhanced”. The rehab block is built on land the society owns, so a developer that treats the society as a customer may have to recognise the rehab revenue progressively rather than on handover. The argument for recognition over time is the society’s title to the land and to everything built on it. The argument against is that the society has no practical control of the site during construction, having given the developer exclusive possession under the agreement. If paragraph 35(b) applies, the accounting profit on the rehab component in the example below is spread across the construction years instead of falling in the year of handover, and book profit moves with it. Neither the ICAI nor any decision traced has addressed the point.

Advances and the financing component. Free-sale buyers in a redevelopment often pay most of the price years before possession. Ind AS 115, in paragraphs 60 to 65, requires an adjustment for a significant financing component where the timing of payments gives one party a significant benefit of financing, so the developer recognises notional interest on the advances and a correspondingly higher revenue on handover. That shifts book profit between years. For normal tax the developer’s position is that notional interest is not expenditure incurred and the higher revenue is not income until the units are recognised; the two book entries reverse over the project, but under the credit position in the Income-tax Act, 2025 discussed below, a timing difference in book profit may not be recovered.

Non-cash consideration. Paragraph 66 requires an entity to “measure the non-cash consideration (or promise of non-cash consideration) at fair value”; paragraph 67 allows measurement by reference to the stand-alone selling price of the goods or services promised if fair value cannot reasonably be estimated; and paragraph 69 provides that if a customer contributes goods or services to facilitate fulfilment and the entity obtains control of them, the entity “shall account for the contributed goods or services as non-cash consideration received from the customer”. A developer that treats the society as a customer for the rehab flats therefore recognises revenue on the rehab flats at the fair value of the development rights received, and records the same amount as the cost of those rights in inventory. These paragraphs were read in a published reproduction of the standard, not the Gazette.

What that does to the numbers. Using the worked example in Part 2, suppose the developer values the development rights at Rs 18.00 crore and recognises the rehab flats at a point in time on handover in year two. Year two revenue includes Rs 18.00 crore for the rehab flats, against which the cost of the rehab construction and member payments, Rs 14.76 crore, is charged, giving accounting profit of Rs 3.24 crore in year two; the development rights then sit in inventory at Rs 18.00 crore and are charged against the free-sale revenue in year three. The total over the project is unchanged; the year two profit is the difference between a fair value estimate and the actual cost. No ICAI Ind AS Transition Facilitation Group clarification on rehab flats or redevelopment was found in the compendium of bulletins to December 2018, and later bulletins were not searched, so the treatment described is an application of the standard, not an endorsed interpretation. The ICAI’s separate Guidance Note on Accounting for Real Estate Transactions for entities applying Ind AS provides, as quoted in the order reproduced in DBS Realty, that development rights acquired by giving up rights over existing structures are measured under the exchange-of-assets principles of Ind AS 38; it was not read in its own text.

For normal tax. The normal computation does not follow the gross-up automatically. For the reasons in Part 1, the developer’s position is that no income arises on the rehab handover, and the year two profit recognised in the books should be excluded from the normal computation and the inventory brought back to actual cost. That produces a difference between book profit and total income, which is where the minimum tax comes in.

The minimum tax: book profit, section 115JB(2A) and (2C), and the Ind AS 115 reversal

The structure. Under section 115JB of the 1961 Act, a company whose tax on total income is less than the specified percentage of its book profit pays tax on book profit instead; the rate is fifteen per cent for assessment years from 2020-21 by the proviso to sub-section (1). Book profit is the profit in the statement of profit and loss prepared under the Companies Act, adjusted only by the items in Explanation 1. The Assessing Officer cannot go behind accounts certified under the Companies Act except as the Explanation permits, as the Supreme Court held in Apollo Tyres Ltd. v. CIT, (2002) 255 ITR 273. Section 115JB does not apply to a company that has exercised the option under section 115BAA, by sub-section (5A)(ii). How the minimum tax interacts with a Chapter VI-A deduction, the credit under section 115JAA, the alternate minimum tax on a firm or limited liability partnership under section 115JC, and the changes in section 206 of the Income-tax Act, 2025 are treated in detail in the affordable housing article and on the section 115JB and section 115JC provision pages, and are not repeated here.

Section 115JB(2A): the recurring Ind AS adjustment. For a company whose financial statements comply with Ind AS, book profit is further “(a) increased by all amounts credited to other comprehensive income in the statement of profit and loss under the head ‘Items that will not be re-classified to profit or loss’” and “(b) decreased by all amounts debited” under that head, and (c) and (d) adjust for distributions of non-cash assets in a demerger under Appendix A to Ind AS 10. The first proviso excludes revaluation surplus under Ind AS 16 and Ind AS 38 and gains or losses on equity instruments designated at fair value through other comprehensive income under Ind AS 109; the second proviso brings those excluded amounts in when the asset or investment is disposed of. Sub-section (2A) operates every year. It is not a transition provision.

Section 115JB(2C): the transition amount on first adoption. For an Ind AS company, “the book profit of the year of convergence and each of the following four previous years, shall be further increased or decreased, as the case may be, by one-fifth of the transition amount”. The “convergence date” is “the first day of the first Indian Accounting Standards reporting period as defined in the Indian Accounting Standards 101”, the “year of convergence” is the previous year in which it falls, and the “transition amount” is “the amount or the aggregate of the amounts adjusted in the other equity (excluding capital reserve and securities premium reserve) on the convergence date”, excluding six listed items: amounts in other comprehensive income to be reclassified later, revaluation surplus, gains or losses on equity instruments at fair value through other comprehensive income, fair value as deemed cost for property, plant and equipment and intangibles, fair value as deemed cost for investments in subsidiaries, joint ventures and associates, and cumulative translation differences. Sub-sections (2A) to (2C) were inserted together by section 47 of the Finance Act, 2017 (Act No. 7 of 2017), in force from 1 April 2017 under section 1(2) of that Act. Sub-section (2D) is not an Ind AS provision; it allows recomputation of book profit where an advance pricing agreement or a secondary adjustment brings in income of past years.

For a real estate developer the transition amount on first adoption was large, because moving from the Guidance Note’s percentage of completion to Ind AS often reversed revenue already recognised. In DCIT v. DLF Limited, ITA 711 and 673/Del/2024, decided on 23 April 2025 for assessment year 2017-18, a first adoption case in which Rs 5,82,695.93 lakh was adjusted in opening other equity, the Delhi Tribunal held at paragraph 59 that the claim was “bona-fide in view of the mandatory adoption of the Ind-AS … and being revenue neutral should be allowed”, dismissing the Revenue’s ground.

The Ind AS 115 reversal: outside sub-section (2C). A company that was already on Ind AS when Ind AS 115 came into force on 1 April 2018, and that moved from recognising revenue over time to recognising it at a point in time, typically applied the standard with a cumulative catch-up adjustment to opening retained earnings on 1 April 2018, reversing profit recognised in earlier years. That adjustment is not on “the convergence date”, which for such a company fell two or three years earlier, so on the words of sub-section (2C) it is not part of the transition amount. It also never passes through the statement of profit and loss, so it is not in book profit as computed under Explanation 1 unless an item of the Explanation brings it in.

Both sides have a serious argument.

• The developer’s argument is that the profit reversed to retained earnings had already been included in book profit, and minimum alternate tax paid on it, in the earlier years; that the same profit will be recognised again in the statement of profit and loss when the units are handed over under Ind AS 115; and that unless the reversal is deducted in the year of adoption the same profit is taxed twice as book profit. In DLF Limited (Revenue and cross appeals), ITA 713, 714 and 715/Del/2024 and ITA 676 and 677/Del/2024, decided on 30 October 2025, the Delhi Tribunal dealt with Rs 6,09,185.90 lakh of margin “debited in retained earnings” on the move to Ind AS 115 for assessment year 2019-20, and held at paragraph 15 that “profits already declared and now reversed should be deducted while computing book profits, as per Explanation (i) of section 115JB as well as under normal tax provisions”, allowing the deduction at paragraph 22 “in order to avoid double taxation”. The dispute in that case was mainly about the normal computation, the remark on book profit may be obiter, and sub-section (2C) is not discussed anywhere in the order.
• The Revenue’s argument is that book profit is a creature of the statute; that Parliament provided expressly for one transition adjustment, on the convergence date, and did not provide for a later change in accounting standard; that the items in Explanation 1 are exhaustive and none of them reduces book profit by an amount debited to retained earnings; and that Apollo Tyres confines the computation to the statement of profit and loss as adjusted by the Explanation. On this view any double counting is a consequence of the statute that only Parliament can cure.

There is also an older line of authority on adjustments made directly to reserves under Indian accounting standards. In Bata India Ltd. v. DCIT, reported at [2019] 111 taxmann.com 453, the Kolkata Tribunal is reported to have reduced book profit by a transitional liability under Accounting Standard 15 charged to reserves; that decision was not read. No High Court decision and no Board clarification on the Ind AS 115 reversal was traced. The Board’s Circular 24 of 2017 of 25 July 2017, which answered questions on book profit for Ind AS companies, does not deal with adjustments to retained earnings after the convergence date; it was read only in a published reproduction.

The barter gross-up and book profit. Where an Ind AS developer books revenue on rehab flats at the fair value of development rights, as described above, any excess of that fair value over the actual cost of the rehab component passes through the statement of profit and loss in the year of handover and into book profit, though, on the developer’s view in Part 1, it is not income for normal tax. The amount reverses when the development rights are charged to cost against the free-sale revenue. For a company paying minimum alternate tax, the gross-up therefore accelerates book profit, and with it tax, into the rehab handover year. Since Explanation 1 contains no item to exclude it, the developer’s remedy is in the accounting measurement, not in the computation.

The Income-tax Act, 2025. Section 206 is the counterpart of sections 115JB and 115JC. The rate for a company is fourteen per cent in section 206(1)(b)(ii), substituted for fifteen per cent by Act No. 4 of 2026 with effect from 1 April 2026. The Ind AS adjustments are in the Table in section 206(1)(d)(ix), where serial 3 in both columns reads “amount being one-fifth of the transition amount in the year of convergence and each of the following four tax years”, and the definitions of convergence date, transition amount and year of convergence are in clause (t). The section 115BAA switch-off is section 206(1)(q)(ii), by reference to the option under section 200(5) or section 201(2). The credit position is set out in the affordable housing article.

Firms and limited liability partnerships: the alternate minimum tax

Most redevelopment developers in Ahmedabad and Surat are partnership firms or limited liability partnerships, not companies, and section 115JB does not reach them. Their minimum tax is the alternate minimum tax in section 115JC, and it is narrower. Under section 115JEE it applies only to a person that has claimed a deduction under Part C of Chapter VI-A (other than section 80P), under section 10AA or under section 35AD. A redevelopment firm that claims none of those pays no alternate minimum tax, however its accounts recognise revenue. The Ind AS gross-up and the Ind AS 115 reversal discussed above do not touch it, because section 115JC works from total income, not book profit, and a firm will rarely report under Ind AS in any case.

The tax bites where a slum project claims section 80-IB(10) or, for a project approved within its window, section 80-IBA. Adjusted total income is total income increased by the Chapter VI-A deduction and by the section 35AD deduction less the depreciation allowable, and tax at eighteen and one-half per cent of adjusted total income is payable where it exceeds the tax on total income, the excess becoming a credit under section 115JD. A firm or limited liability partnership has no threshold, because the exclusion for adjusted total income not exceeding twenty lakh rupees in section 115JEE(2) covers an individual, a Hindu undivided family, an association of persons, a body of individuals and an artificial juridical person, and not a firm. The detailed computation and the credit are set out in the affordable housing article and on the section 115JC provision page.

In the Income-tax Act, 2025 the alternate minimum tax is in section 206(2). On the Department’s 2025 edition of section 206, the rate for persons other than companies is eighteen and one-half per cent, and an individual, a Hindu undivided family, an association of persons, a body of individuals or an artificial juridical person whose adjusted total income does not exceed twenty lakh rupees is excluded. The text of sub-section (2) on the 2026 edition, which records the Finance Act, 2026 amendments to sub-section (1), could not be read in full, so whether sub-section (2) was also amended could not be confirmed.

The open point for a firm is the one the affordable housing article argues for section 80-IBA. The firm’s argument is that a deduction denied in the normal computation for want of a condition is not “claimed”, so adjusted total income does not rise. The Revenue’s argument is that the claim made in the return is enough, whatever its fate. Neither view has been settled for a slum project.

A worked example: the rehab gross-up and the minimum tax

The worked example in Part 2 can be carried into the minimum tax. The developer is a company reporting under Ind AS that has not opted for section 115BAA. It values the development rights at Rs 18.00 crore and hands over the rehab flats in year two; the free-sale units are completed and handed over in year three. The figures are illustrative, the normal rate is taken at twenty-five per cent for illustration, and surcharge and cess are ignored.

	Year two	Year three	Total
Book profit (Ind AS, gross-up on rehab flats)	3.24	4.10	7.34
Total income (developer’s position: no income on rehab handover)	nil	7.34	7.34
Normal tax at 25 per cent	nil	1.835	1.835

Under the 1961 Act, with minimum alternate tax at fifteen per cent, year two tax is fifteen per cent of 3.24, or Rs 0.486 crore, paid as minimum alternate tax. In year three, normal tax of Rs 1.835 crore exceeds minimum alternate tax of fifteen per cent of 4.10, or Rs 0.615 crore, so the developer pays normal tax and sets off the credit of Rs 0.486 crore under section 115JAA against the excess. Total tax over the two years is 0.486 plus 1.349, which is Rs 1.835 crore, exactly the normal tax. The gross-up has cost the developer only the time value of Rs 0.486 crore for a year.

Under the Income-tax Act, 2025, if both years are tax years from 2026-27, year two tax is fourteen per cent of 3.24, or Rs 0.454 crore. The clauses of section 206(1) that gave a company credit for minimum alternate tax were omitted with effect from 1 April 2026, so on the face of the text there is no credit to set off in year three, and the developer pays the full Rs 1.835 crore of normal tax as well. Total tax becomes Rs 2.289 crore on a profit of Rs 7.34 crore, the extra Rs 0.454 crore being the permanent cost of an accounting measurement. The reasons why the credit has gone, and the narrow survival of brought-forward credit in section 206(3) for a company that has exercised an option under section 200(5) or section 201(2), are set out in the affordable housing article.

What the example shows. Under the 1961 Act the rehab gross-up was a timing cost. Under the 2025 Act, on the face of the text, it can be a permanent one. A developer company reporting under Ind AS that does not opt for the concessional rate should therefore look hard at the measurement of non-cash consideration on its rehab component, and at whether the society is properly treated as a customer at all. The same arithmetic applies to the Ind AS 115 reversal: under the 1961 Act a reversal not allowed in computing book profit was largely recovered through credit, while under the 2025 Act any book profit taxed twice may not be.

Slum schemes: section 80-IB(10), section 35AD and section 80-IBA

Section 80-IB(10) and the slum proviso. Section 80-IB(10) allowed a hundred per cent deduction of the profits of a housing project approved by a local authority before 31 March 2008, subject to conditions in clauses (a) to (f). Clause (a) required commencement on or after 1 October 1998 and completion within stated periods; clause (b) required a plot of at least one acre. The proviso after clause (b) reads:

Provided that nothing contained in clause (a) or clause (b) shall apply to a housing project carried out in accordance with a scheme framed by the Central Government or a State Government for reconstruction or redevelopment of existing buildings in areas declared to be slum areas under any law for the time being in force and such scheme is notified by the Board in this behalf;

Sub-section (10) was substituted, with this proviso, by section 18 of the Finance (No. 2) Act, 2004 with effect from 1 April 2005, as read on the Department’s page for that Act. The proviso relaxes only clauses (a) and (b). Clause (c), the built-up area limits on residential units, clause (d), the commercial area condition, and clauses (e) and (f), the allotment conditions, continue to apply to a slum project. The general section 80-IB(10) jurisprudence, on built-up area, commercial area, ownership and completion, is treated in the affordable housing article and is not repeated here.

The notifications. The Board notified the scheme in regulation 33(10) of the Development Control Regulations for Greater Mumbai, 1991, by Notification 67 of 2010 dated 3 August 2010, excluding certain categories, and the Maharashtra slum redevelopment scheme under section 37(2) of the Maharashtra Regional Town Planning Act, 1966 by Notification 1 of 2011 dated 5 January 2011, stated to apply to projects approved between 1 April 2004 and 31 March 2008, from assessment year 2005-06. Notification 2 of 2011 of the same date amended Notification 67 of 2010. None of the three was read on the Department’s site; Notification 67 of 2010 and Notification 2 of 2011 are reproduced in full in Kiran Harsukhlal Hemani, discussed below, and Notification 1 of 2011 in Bhavya Construction. Commentaries frequently confuse the numbers of the two January 2011 notifications. No notification of a Gujarat slum scheme under the proviso was found.

The conflict. In Ramesh Gunshi Dedhia v. ITO, decided by the Mumbai Tribunal on 14 March 2014 for assessment year 2008-09 and reported at [2014] 45 taxmann.com 155, the Tribunal held that the Board’s notification was invalid to the extent it restricted eligibility to projects approved in a stated window, because the Board “cannot insert a new condition in the provisions of a statute”; the Revenue’s appeal against it was withdrawn on low tax effect, as recorded in Bhavya Construction. In Bhavya Construction Co. v. ACIT, ITA 4389 and 4390/Mum/2014, decided on 25 February 2025 for assessment years 2006-07 and 2007-08 on remand from the Bombay High Court, the Tribunal followed Ramesh, reproducing at paragraph 14 its holding that “the second part of the notification dated 5th January 2011 is inconsistent/contrary to the proviso”, and that the assessee was eligible “if the other conditions as prescribed under clause (c) to (e) are satisfied”. Five weeks earlier, however, a Division Bench of the Bombay High Court had decided Kiran Harsukhlal Hemani v. Union of India, Writ Petition 2940 of 2021, with Bombay Slum Redevelopment Corporation Pvt. Ltd. v. Union of India, Writ Petition 3004 of 2021, on 20 January 2025, holding at paragraph 22 that “the Proviso to sub-clauses (a) and (b) of Section 80-IB (10) is not declaratory or clarificatory” and at paragraph 26 that “the impugned notification restricts its scope to the period from which the proviso came into force”, upholding Notification 2 of 2011 and dismissing the petitions. Bhavya Construction does not cite Hemani. The two concern technically different notifications, Hemani the corrigendum to Notification 67 of 2010 and Bhavya and Ramesh Notification 1 of 2011, but Hemani’s reasoning, that the proviso is prospective and that a notification may confine it accordingly, cuts directly against them, and a Division Bench of the jurisdictional High Court binds the Mumbai Tribunal. The developer’s argument after Hemani is that its project falls within the window the notification permits, or that the notification relevant to its project is a different one. The Revenue’s argument is that Hemani settles the validity of period restrictions in the notifications. A separate appeal on whether the proviso and the notification are retrospective, Ramesh G. Dedhia v. ACIT, Income Tax Appeal 2469 of 2010, was admitted by the Bombay High Court in 2011; its disposal was not traced.

What qualifies. In Aarti Projects and Constructions v. DCIT, ITA 4190/Mum/2016, decided on 5 January 2017 for assessment year 2012-13, the Tribunal held at paragraph 22 that “neither clause (a) concerning completion of the project, nor clause (b) relating to the size of the land applies to a project constructed for rehabilitation of slum dwellers”, held at paragraph 24 that clause (c) “is concerned with the residential units constructed” rather than FSI sold, and held at paragraph 12 that profit on FSI earned as consideration for the rehab buildings qualified. In Sumer Corporation, TDR sale proceeds from a regulation 33(10) project were held eligible. In ITO v. Pramukh Enterprises, ITA 6055/Mum/2009, decided on 26 November 2010 before any notification existed, the Tribunal held at paragraph 17 that “in the absence of a notification by the Board, it is not possible to ignore the condition”, and enforced the completion condition. And in Hiranandani Akruti JV, ITA 5416/Mum/2009, decided on 30 March 2010, the Tribunal observed at paragraph 23 that “the legislature has recognized that slum rehabilitation is also a housing project”.

Ownership and completion: Gujarat and Bombay. Two High Court decisions on section 80-IB(10) generally are directly relevant to redevelopment, where the developer never owns the land. In CIT-I v. Radhe Developers, Tax Appeal 546 of 2008 with connected appeals, decided on 13 December 2011, the Gujarat High Court held at paragraph 30 that the provision “nowhere required that only those developers who themselves own the land would receive the deduction”, and at paragraph 45 that the assessees were “entitled to the benefit under Section 80IB(10) of the Act even where the title of the lands had not passed”; its report citation could not be verified. That reasoning supports a redevelopment developer that holds only development rights. In Pr. CIT v. Atul Properties, ITA 247 of 2024, decided on 31 July 2026, on a project with a slum authority commencement certificate, the Bombay High Court, noting at paragraph 17 that the Madhya Pradesh High Court had held that “a mere architect certificate certifying completion cannot substitute the approval issued by the local authority”, and holding at paragraph 18 that its own view diverged from the Bombay decision in Hindustan Samuh Awas, referred two substantial questions to a Larger Bench. Where a slum project relies on the proviso, completion is relaxed; where it does not, proof of completion by an architect’s certificate is unsettled in Bombay until the Larger Bench decides.

The minimum tax. A section 80-IB(10) deduction does not reduce book profit, because Explanation 1 to section 115JB has no item for a Chapter VI-A deduction. A slum developer company claiming the deduction pays minimum alternate tax on the profit.

The Income-tax Act, 2025. Section 141 allows the deduction to an assessee “eligible to claim a deduction … under the provisions of the said section [80-IB], as if the said Act had not been repealed”, computed under section 80-IB and for the years it would have been allowed. It repeats no slum wording; the proviso operates through the incorporation.

Section 35AD. Section 35AD(8)(c)(vi) includes, among specified businesses eligible for a deduction of capital expenditure, “developing and building a housing project under a scheme for slum redevelopment or rehabilitation framed by the Central Government or a State Government, as the case may be, and notified by the Board in this behalf in accordance with the guidelines as may be prescribed”, for operations commencing on or after 1 April 2010 under section 35AD(5)(ac). No Board notification of a slum scheme under clause (vi), and no decision, was found. Without a notified scheme the clause is inoperative. The counterpart in the Income-tax Act, 2025 is section 46, at serial 4 of the Table in sub-section (6) and clause (d)(vi) of sub-section (11).

Section 80-IBA. Section 80-IBA contains no slum, redevelopment or scheme wording. A redevelopment project can qualify only if it meets the section’s own conditions as an affordable housing project approved after 1 June 2016 and on or before 31 March 2022. Those conditions, and the application of the deduction to projects with a rehab component, are dealt with in the affordable housing article.

Open questions in Part 3, argued both ways

1. Does section 43CB reach the rehab component of a redevelopment? For the Revenue: the rehab component is a negotiated contract to construct an asset for the society to its specification. For the developer: it is the price of development rights in a single bargain, and one project cannot carry two methods. Undecided; the Ahmedabad and Chennai decisions concern ordinary developers.

2. Does rehab construction count towards the Guidance Note’s twenty-five per cent cost threshold? For the Revenue: it is construction cost. For the developer: paragraph 2.2(a) makes it cost of land and development rights, which paragraph 5.3(b) excludes. Undecided.

3. Can the Assessing Officer impose percentage of completion on a developer consistently following project completion? For the developer: Bilahari, Manish Build Well, Paras Buildtech, DLF Universal and Mahalaxmi Builders. For the Revenue: where the method distorts profits, as Bilahari itself allows, and where the developer has actually followed percentage of completion, as in Kolte Patil. Settled in principle; each case on its facts.

4. Is the Ind AS 115 reversal deductible in computing book profit? For the developer: DLF Limited in October 2025 and the double taxation it avoids. For the Revenue: it is outside sub-section (2C) and outside every item of Explanation 1. Undecided above the Tribunal.

5. Does an Ind AS gross-up on rehab flats create book profit? For the Revenue: the books recognise revenue at fair value and Apollo Tyres binds the computation to them. For the developer: the measurement is an accounting estimate reversed in a later year, and the remedy is in the measurement. Undecided.

6. Can a Board notification limit the section 80-IB(10) slum proviso to a period? For the Revenue: Hemani in January 2025. For the developer: Ramesh Gunshi Dedhia and Bhavya Construction. The Division Bench prevails in Mumbai; the Ahmedabad Bench has no Gujarat notification to apply.

On a live file: a recognition and minimum tax checklist

1. Fix the method in the first year and follow it. Record the method of recognition for the whole project, rehab and free-sale alike, in the accounting policies and the tax audit report, and do not change it without a reason that can be shown to be bona fide.
2. Document the project as a single bargain. If the Revenue argues that the rehab component is a construction contract, the developer’s answer is the agreement itself; it should not price the rehab component separately.
3. Under the Guidance Note, compute the thresholds both ways. Compute the paragraph 5.3(b) cost threshold with and without the rehab construction, and know where each puts the project.
4. Under Ind AS 115, measure non-cash consideration with care. A fair value of development rights far above the actual rehab cost accelerates book profit into the handover year. The valuation should be supportable and its basis recorded.
5. Reconcile book profit and total income every year. Identify each difference: Ind AS gross-up, transition amount, Ind AS 115 reversal, Chapter VI-A deduction, and know which are adjusted by Explanation 1 or sub-sections (2A) and (2C) and which are not.
6. For an Ind AS 115 reversal, claim and disclose. Claim the deduction in computing book profit if the reversed profit was taxed earlier, disclose the basis, and rely on DLF Limited while recognising that it does not address sub-section (2C).
7. For a slum scheme, identify the notification. Know which Board notification covers the project and whether its period restriction applies after Hemani; check clause (c) on the rehab units themselves.
8. Check the section 115BAA position before claiming any deduction. A company that has opted under section 115BAA is outside section 115JB but cannot claim the section 80-IB or section 80-IBA deduction.

Concordance: the Income-tax Act, 1961 and the Income-tax Act, 2025

Subject	Income-tax Act, 1961	Income-tax Act, 2025
Method of accounting and income computation and disclosure standards	section 145	section 276
Construction and service contracts	section 43CB	section 57
Continuation of notifications under the 1961 Act	not applicable	section 536(2)(j)
Minimum alternate tax and alternate minimum tax	sections 115JB and 115JC	section 206
Ind AS transition amount	section 115JB(2C)	section 206(1)(d)(ix), Table serial 3, and clause (t)
Concessional rate for a domestic company	section 115BAA	section 200
Housing project deduction including the slum proviso	section 80-IB(10)	section 141
Affordable housing deduction	section 80-IBA	section 142
Investment-linked deduction for a slum housing project	section 35AD(8)(c)(vi)	section 46

Go back to Part 1: the schemes and the characterisation of what the developer gets and gives or Part 2: what the developer pays the members, as cost or capital, and withholding.

This note is general commentary on the law as at 22 October 2026 and is not advice on any matter. The position in a particular case depends on its own facts.