[Opinion] Flower Beds Not Part of Built-Up Area | Bombay HC Clarifies

Meenakshi Subramaniam – [2025] 176 taxmann.com 905 (Article)

In a light-hearted yet crucial exchange, two builders developing housing projects found themselves deep in discussion over the definition of “built-up area” under the Income Tax Act, 1961—specifically concerning flower beds. The discussion arose due to disallowances under Section 80-IB(10), a provision that offers tax benefits to builders of eligible housing projects. The crux of the issue was whether flower beds, which extend beyond the usable living space, should be counted as part of the built-up area, potentially pushing units over the size threshold and disqualifying them from the tax benefit.

A Dictionary Twist on ‘Built-Up Area’
One of the builders lightened the mood by pointing out a dictionary definition he came across, stating that only habitable areas qualify as built-up space. He reasoned that since nobody could possibly live in a flower bed, it logically couldn’t be considered built-up area. The other builder, appreciating the logic but aware of the unpredictable interpretations of tax law, quipped that a tax lawyer might still argue that the term “bed” in “flower bed” implies it can be used for sleeping, thus qualifying it as built-up area.

High Court Clarifies Position in Nahar Enterprises Case
The debate mirrored a real legal battle in the case of Pr. CIT v. Nahar Enterprises [2025] 176 taxmann.com 570 (Bom.), where the Income Tax Department argued that flower beds were part of the built-up area, resulting in denial of the Section 80-IB(10) benefit. The case hinged on whether such non-functional architectural elements could be included in the unit’s built-up measurement. This classification would affect eligibility for tax deductions under the said section, which imposes limits on the area of individual residential units in approved housing projects.

Bombay HC Offers Relief to Builders
Fortunately for the taxpayer, the Bombay High Court took a practical approach. It observed that flower beds are generally constructed below the floor level and are neither enclosed nor usable as a living area. Therefore, they should not be considered as part of the built-up area for the purposes of Section 80-IB(10). By doing so, the Court offered much-needed clarity and relief to real estate developers, setting a precedent that protects them from arbitrary disqualifications based on architectural embellishments like flower beds.