PCIT Vs Nahar Enterprises (Supreme Court of India)
Background: Nahar Enterprises, a partnership firm engaged in construction and property development, developed the “Amrut Shakti” residential project at Chandivali, Mumbai and had claimed deduction under section 80IB(10) of the Income-tax Act, 1961. The firm was dissolved on 20 November 2011 after its business was taken over by Nahar Builders Ltd.; the Income Tax Department had been informed of the change on 1 December 2011. A search under section 132(1) and survey under section 133A were subsequently conducted on 2 February 2012. The assessee contended that the search warrant was issued in the name of the dissolved firm and therefore the consequential assessment was invalid.
Read HC Judgment in this case: Flower Bed Area Cannot Be Included in Built-Up Area for Section 80IB(10) Deduction: Bombay HC
The assessment under sections 143(3) read with 153A was nevertheless completed. The Assessing Officer also denied deduction under section 80IB(10), treating flower-bed/sunken areas, service areas, window areas and various projections as part of the “built-up area”. The CIT(A) excluded service area, window area, window projections and cupboard projections but included the flower-bed area.
ITAT and High Court Proceedings
The ITAT held that the assessment proceedings were a nullity because the search warrant had been issued in the name of a non-existent entity. On the substantive issue, it held that flower-bed areas below the floor level could not be included in “built-up area” for determining the 1,000 sq. ft. limit under section 80IB(10). It also upheld exclusion of the service area, window area, window projections and cupboard projections.
