TMI Blog2018 (5) TMI 1771X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee is a builder and developer. The issue of taxability is with regard to 51 unsold flats. The AY is 2012-13. In view of the insertion of sub-section (5) in section 23 by the Finance Act, 2017, w.e.f. 01.04.2018 narrated here-in-before, we set aside the order of the Ld. CIT(A) and allow the 1st ground of appeal. Addition u/s 14A - Held that:- As per the balance sheet as at 31.03.2012, the partner’s capital account having a credit balance of ₹ 19,28,71,467/- is more than the investment in mutual funds to the tune of ₹ 51,45,000/-. Thus we delete the disallowance of ₹ 1,38,951/- made by the AO under Rule 8D(2)(ii). As regard Rule 8D(2)(iii) While the fixed administrative expenses were excluded on the ground that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2012-13 on 28.09.2012 declaring total income of ₹ 5,46,61,400/-. During the course of assessment proceedings, the Assessing Officer (AO) observed from the books of accounts that the assessee had an inventory of 47 unsold flats in Highness Project and 4 unsold flats in Sea Loung Project. In response to a query raised by the AO to explain why deemed house property income be not charged on completed flats in possession of the assessee in view of the decision in CIT v. Ansal Housing Construction Ltd. 241 Taxman 418 (Del), the assessee filed a reply submitting that it is only into building and construction activity and not into leasing or renting the flats. The AO vide order sheet noting dated 27.02.2015 asked the assessee to explain as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n my view, the yearly appreciation in rent rates is not likely to be as high as 10%, as contended by the appellant, and it may be in the range of 5% - 7%. Therefore, considering the overall facts of the case, it will be appropriate to adopt the fair market rent for the unsold flats in question at ₹ 13,000/- per month per flat. Consequently, the annual letting value of the 51 unsold flats may be worked out at ₹ 79,56,000/-. After allowing deduction of ₹ 23,86,800/- u/s.24(a) of the Act, the deemed income from house property assessable in the hands of the appellant works out to ₹ 55,69,200/- as against ₹ 64,26,000/- worked out by the AO. Accordingly, the addition of ₹ 64,26,000/- made by the AO is restricte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Finance Act, 2017, w.e.f. 01.04.2018: (5) Where the property consisting any building or land appurtenant thereto is held as stock-in-trade and the property or any part of the property is not let during the whole or any part of the previous year, the annual value of such property or part of the property, for the period up to one year from the end of the financial year in which the certificate of completion of construction of the property is obtained from the competent authority, shall be taken to nil. Thus, in order to give relief to Real Estate Developers, section 23 has been amended w.e.f. AY 2018-19 (FY 2017-18). By this amendment, it is provided that if the assessee is holding any house property as his stock-in-trade which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In appeal, the Ld. CIT(A) agreed with the computation made by the AO u/s 14A r.w. Rule 8D and confirmed the said disallowance of ₹ 1,76,676/-. 11. Before us, the Ld. counsel of the assessee submits that the partners capital account as on 31.03.2012 showed a credit balance of ₹ 19,28,71,467/- which was more than enough to cover the investment in mutual funds to the tune of ₹ 51,45,000/- and therefore, interest expenditure cannot be attributed to tax-free income either in whole or in part. 12. On the other hand, the Ld. DR relies on the order of the Ld. CIT(A). 13. We have heard the rival submissions and perused the relevant materials on record. As per the balance sheet as at 31.03.2012, the partner s capital accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest, no appeal has been preferred by the Revenue on the issue of invoking the principles laid down in Reliance Utilities Power Ltd. (supra) in its application to Section 14A of the Act. In view of the above position of law, we delete the disallowance of ₹ 1,38,951/- made by the AO under Rule 8D(2)(ii). 13.1 In Godrej Boyce Mfg. Co. Ltd. v. Dy. CIT (2010) 194 Taxman 203 (Bom.) the Hon'ble Bombay High Court has explained Rule 8D as under : As regard Rule 8D(2)(iii), it had been submitted that some mechanism or formula had to be adopted for attributing part of the administrative / managerial expenses to tax-exempt investment income. The administrative expenses attributable to tax-free investment income have a fixed c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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