TaxTMI 
TaxTMI 
TaxTMI 
2025 (7) TMI 1060
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....sued in the name of non-existing entity when the search warrant specifically mentioned the name of the merged entity and the existing entity as Nahar Enterprises (now known as Nahar Builders Limited)? 6.2 Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT is justified in holding that search warrant was issued in the name of non-existing entity, when, the said entity had only merged with other entity and there was no stoppage or discontinuation of business operations? 6.3 Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT is justified in holding that search warrant was issued in the name of non-existing entity, when, the such merged entities take over all the assets, liabilities and business operations of the merging entity including assessment proceedings and tax liabilities? 6.4 Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT is justified in directing the AO to delete the disallowance of deduction u/s 80IB(10) of the Income Tax Act, 1961 by holding that flower beds are below the floor level and so not covered in BUA in terms of provisions of section 80IB(14)(a), ....
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....on No.6.8 will be considered therein. 3. Before we decide whether the Questions as projected by the Revenue give rise to any Substantial Question of Law, it would be apposite to set out some brief facts. Nahar Enterprises, a partnership firm, (the Assessee) was formed in the year 1978 and was engaged in the business of construction of buildings and development of properties. On 9th September 2011 a new company was incorporated under the Companies Act, 1956 in the name and style of "M/s. Nahar Builders Limited". The partnership firm - Nahar Enterprises (the Assessee) was dissolved on 20th November 2011 and the business of the said firm was taken over by the company-Nahar Builders Ltd. It is not in dispute that the Income Tax Department was informed qua the said change in the status, namely, that Nahar Enterprises was dissolved and its business was taken over by M/s. Nahar Builders Ltd. This was informed to the Income Tax Department vide a letter dated 1st December 2011. 4. The firm M/s. Nahar Enterprises, before its dissolution, was engaged in the business of developing a residential complex with the name "Amrut Shakti", Chandivali, Andheri (E), Mumbai wherein it had completed as ....
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....ith the findings of the Assessing Officer that they would have to be included for calculating the eligible limit of 1000 sq. ft for the purpose of allowing the deduction under Section 80IB(10). 8. Being aggrieved by the order of the CIT(A), the Assessee preferred an Appeal before the Income Tax Appellate Tribunal (for short "ITAT"). The Assessee argued that the firstly the search warrant itself was issued to a non-existent entity and, therefore, any proceedings taken pursuant thereto were non-est law. This apart, the Assessee also argued that on merits, namely, that the flower bed area could never have been included in the definition of "built up area" to calculate the eligible area of 1000 sq.ft as stipulated in Section 80IB(10) of the IT Act. The Revenue also challenged the order of the CIT(A) insofar as it set aside the order of the Assessing Officer to include cupboard projections; service area; and window projections for the purposes of calculation of the "built up area" of the eligible 1000 sq.ft. 9. The Tribunal, after hearing the parties, by a detailed order held in favour of the Assessee on all counts. In other words, the Tribunal firstly held that the assessment made un....
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....e submissions of the Assessee, where the Assessee has placed reliance on the words "built up area" as defined in Section 80IB(14)(a) of the IT Act and submitted that the crux of the definition and intention behind definition of the words "built up area" was to include only the habitable area which is exclusively built for a particular residential unit at the floor level. Since the flower bed area is not a habitable area at all and further, not on the floor level, the flower bed area could never be included in the "built up area" for determining the eligible 1000 sq.ft. to claim a deduction under Section 80IB(10). After noting the submissions of the Assessee, the Tribunal came to the conclusion that there was considerable force in the submission of the Assessee that the flower bed area could not be included in the definition of "built up area" while calculating the eligible limit of 1000 sq.ft. for the purposes of allowing the deduction under Section 80IB(10) of the IT Act. The Tribunal came to a factual finding that the flower bed area is open to the sky and not covered on any sides whereas the balcony is covered by three sides. Further the flower bed area is a few inches below the....
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....itable area used by the resident of the flat. Such areas are enclosed and surrounded by four walls and are at floor level. The words following these words namely "including the projections and balconies" are in continuity. In other words, if there are any projections or balconies that are habitable/are capable of being effectively used by the flat purchaser, the same would be includable in the definition of the words "built up area". Thereafter, there is a third aspect which needs to be taken into consideration for calculating the built up area i.e. "thickness of the walls". The section makes it very clear that common areas shared with other residential units is not to be included in the definition of "built up area". When we examine this definition, we find that the ITAT was completely justified in excluding the flower bed area from the definition of the words "built up area" while calculating the eligible limit of 1000 sq.ft. for the purposes of allowing the deduction under Section 80IB(10) of the IT Act. Firstly, the flower bed area is admittedly outside the residential units inasmuch as it starts where the balcony ends. Secondly, it is open to the sky and is not covered either ....
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....r room and it would have already been included in the area of the other room, and therefore, a separate addition in this regard was not warranted. He, accordingly, held that the cupboard projections / area is not liable to be added separately in the "built up area" as the wall area would already take care of it. As far as the service area is concerned, the CIT(A) was of the opinion that the service area is in the nature of a service pipe duct, which continues from the top floor to the ground floor and carries service pipes, namely, soil pipe, waste water pipe, water mains etc. The CIT(A) noted that during the course of physical inspection of various apartments on 5th June 2014, it was noticed that this area was quite small and carries as many as 12 to 14 pipes. The CIT(A) noted that though a slab has been constructed at every floor and a door is provided in the bathroom to enter into the service area, this area is primarily meant for repair of service pipes, and it cannot be used for any other purposes. Further, this service duct was some kind of a common area like a stair case, flowing from top to bottom and in case of any blockage of pipes or repair or leakage etc. the mechanic ....
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....uilt up area" when it is already included in the wall area itself. This is a factual finding given by the CIT(A). Once this is the case, we are of the opinion that the CIT(A) correctly excluded the cupboard projections from the calculation of "built up area". Similarly, as far as the service area is concerned, it is basically a common area which runs throughout the building for the purpose of laying pipes namely, soil pipe, waste water pipe, water mains etc. This service area cannot be used by the flat purchaser. In fact, the CIT(A) has categorically stated that this area being small, cannot be used for any other purposes. After perusing the photographs produced by the Assessee, the CIT(A) also found that the ducts are open and dangerous, which is another factor which led the CIT(A) to believe that the service area is not for the use of flat owners but used for the purpose of repairing the pipes that run through the building. We have no hesitation in holding that the service area would be akin to a common area and which is specifically excluded from the words "built up area" reproduced by us earlier. Therefore, this could have never been included in the calculation of "built up are....