2015 (1) TMI 972 - HC - Income Tax

Income from house property - value of the vacant area - Held that - It is seen from the order of the Tribunal that the Tribunal has taken a different view that the assessee has held the balance property as stock-in-trade. Since the order of the Commissioner of Income Tax (Appeals), confirming the assessment of Annual Letting Value of the vacant space under the head 'income from house property in respect of both the assessment years, has not been challenged by the assessee, the Tribunal is not justified in coming to a conclusion that the property is held as stock-in-trade, thereby, upholding the deletion of the addition of Annual Letting Value. To that extent, the order of the Tribunal becomes beyond the scope of appeal. Hence, we find that the issue has to be re-addressed by the Tribunal. - Decided in favour of revenue for statistical purposes.

Summary

Issues:
1. Assessment of vacant land under 'Income from house property'
2. Adoption of Annual Letting Value for vacant land

Analysis:

Issue 1: Assessment of vacant land under 'Income from house property'
The case involved appeals by the Revenue against the order of the Income Tax Appellate Tribunal regarding the assessment years 1998-99 and 1999-2000. The Assessing Officer had assessed the value of vacant land under the head 'income from house property' by adopting an annual letting value of Rs. 170 per sq.ft. The Commissioner of Income Tax (Appeals) confirmed the assessment but deleted the additions towards Annual Letting Value, citing non-conformity with court guidelines. The Department contended that the assessee did not challenge this assessment before the Tribunal. However, the Tribunal upheld the Commissioner's decision, stating that the property was held as stock-in-trade and not chargeable under 'house property.' The Tribunal's view was that Annual Letting Value cannot be taxed under 'house property' for properties held as stock-in-trade, contrary to the Department's argument.

Issue 2: Adoption of Annual Letting Value for vacant land
The Department argued before the Tribunal that the Annual Letting Value of the vacant space should be added to income based on the closing stock value provided by the assessee. They disagreed with the Commissioner's deletion of these additions while upholding the assessment under 'income from house property.' The Tribunal, however, supported the Commissioner's decision, emphasizing that properties held as stock-in-trade cannot be taxed under 'house property.' The Tribunal held that the Assessing Officer was unjustified in estimating the Annual Letting Value as 'income from house property.' Consequently, the Tribunal's order was challenged by the Revenue before the High Court.

In the final judgment, the High Court set aside the Tribunal's order, remanding the matter back for fresh consideration. The Court found that since the assessee did not challenge the assessment under 'income from house property' before the Tribunal, the Tribunal's conclusion that the property was held as stock-in-trade was beyond the scope of appeal. Therefore, the issue needed to be re-addressed by the Tribunal.