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2017 (10) TMI 1603 - AT - Income TaxIncome from house property - Annual value determination - Any distinction between a house property used for residential purposes or not ? - whether a house property owned by the assessee, held for being either sold, as in the case of residential flats at Victoria Towers, or for being let, as in the case of the shopping complex, is liable to be assessed as income from house property u/s. 22? - HELD THAT - As apparent from the clear reading of the relevant provisions, and which again represent trite law, the actual letting of the house property is not a condition for income thereof to be assessable as income from house property u/s. 22. As afore-noted, it is the ownership of the house property per se which is the source of income, and not the fact whether the same is occupied by the assessee only or someone else at a consideration (viz. a tenant) or otherwise. In that sense, it is the income potential of the house property that is subject to tax. The only exception, covered by the provision itself, is where the property is occupied by the owner for the purpose of his business or profession. Fiscal statutes, it is again trite law, have to be strictly construed. What all is therefore relevant, and the only caveat, is that the annual value assessed should capture the fair rental value of the property, qua which we observe no dispute in the present case; the AO having adopted the same on the basis of reliable data. We, therefore, find no legal infirmity in the Revenue assessing the fair rental value of the, since completed, unsold residential flats at Victoria Towers to tax as income from house property u/s. 22. In fact, sec. 23(5) stands inserted by Finance Act, 2017 (w.e.f. 01.04.2018), specifically providing that the annual value of a house property held as stock-in-trade of his business by the assessee shall be taken at nil for a period of one year from the end of the year in which a completion certificate is obtained in its respect. Further endorsing, if it was necessary, that the annual value of a house property held as stock-in-trade is equally assessable u/s. 22, i.e., irrespective of whether the same is actually let or not. The same, it needs to be appreciated, is not in occupation of the owner, much less for the purposes of his business, but represents the inventory of his trade, to be sold or even let. Coming to the rental value, based on factual letting or otherwise, of the unsold shops at the shopping complex Corromandel Plaza . The Revenue has already assessed the rental (annual) income of these shops, being regularly let, as a part of the assessee s business income u/s. 28. Where, then, we may ask, is the question of the Revenue, contradicting its own stand, seeking an assessment of the lettable value or the rent received as income from house property u/s. 22? Where it considers the AO s stand as untenable in law, the only course available to it in law is the revision of his order u/s. 263. The claim for additional depreciation on plant and machinery and car park facility (so that it is not regarded by the assessee as part of the building) has not, as afore-noted, been adjudicated by the ld. CIT(A) per the impugned order, so that the matter shall have to necessarily travel to his file for adjudication after hearing the parties, i.e., in accordance with law, per a speaking order.
Issues Involved:
1. Assessment of annual letting value (ALV) of unsold flats and shops. 2. Claim for additional depreciation on car parking facility and plant and machinery. 3. Procedural objections by the Revenue regarding the CIT(A)'s directions to the AO. Detailed Analysis: 1. Assessment of Annual Letting Value (ALV) of Unsold Flats and Shops: The primary issue concerns whether the unsold flats in Victoria Towers and shops in Corromandel Plaza should be assessed as "income from house property" under Section 22 of the Income Tax Act, 1961. The Assessing Officer (AO) assessed the annual value of these properties as income from house property, applying the average rental value realized by the assessee during the year to the unsold area. This resulted in a tax assessment of ?4,04,37,950 after allowing a standard deduction of 30% under Section 24(a). The Commissioner of Income Tax (Appeals) [CIT(A)] held that the unsold residential apartments in Victoria Towers, being the assessee's trading stock, should not be assessed as income from house property. The CIT(A) directed the AO to verify if the main objects of the appellant company were in consonance with its activities. For the unsold shops in Corromandel Plaza, the CIT(A) found that the assessee provided various inseparable common facilities and services, making the rental income assessable as business income, not as income from house property. The Tribunal upheld the CIT(A)'s view regarding the unsold flats, emphasizing that the ownership of house property per se is the basis for the charge of rental income to tax under the Act, irrespective of whether the property is actually let. The Tribunal cited several Supreme Court decisions, including Sultan Brothers (P.) Ltd. v. CIT and East India Housing & Land Development Trust Ltd., to support this position. The Tribunal found no legal infirmity in the Revenue assessing the fair rental value of the unsold residential flats at Victoria Towers as income from house property under Section 22. Regarding the unsold shops in Corromandel Plaza, the Tribunal noted that the Revenue had already assessed the rental income as part of the assessee’s business income under Section 28. Therefore, the question of assessing the lettable value or rent received as income from house property under Section 22 did not arise. 2. Claim for Additional Depreciation on Car Parking Facility and Plant and Machinery: The second issue involved the assessee's claim for additional depreciation on the car parking facility and plant and machinery installed at the shopping complex. The AO disallowed the claim, stating that the assessee was in the business of construction, which is not included in the definition of manufacturing under Section 2(29BA) of the Act. This aspect remained unadjudicated by the CIT(A), and the Tribunal directed the matter back to the CIT(A) for adjudication after hearing the parties and issuing a speaking order. 3. Procedural Objections by the Revenue: The Revenue raised procedural objections, arguing that the CIT(A) should not have directed the AO to verify the Memorandum of Association (MoA) regarding the Victoria Tower construction. Instead, the CIT(A) should have admitted additional evidence in the form of MoA under Rule 46A, sought the AO’s consideration, and decided accordingly. The Tribunal found this objection of little moment, stating that the CIT(A) was within his powers to call for and examine the MoA and decide accordingly. The Tribunal dismissed the Revenue's procedural objection, emphasizing that the CIT(A) relied on the decision in Chennai Properties & Investments Ltd. v. CIT, which regarded the main objects of the company as relevant in deciding the issue. Conclusion: The Tribunal partly allowed the Revenue’s appeal, allowed the assessee’s cross-objection for statistical purposes, and dismissed the assessee’s appeal as not maintainable. The Tribunal upheld the assessment of the fair rental value of the unsold residential flats as income from house property under Section 22, while the rental income from the unsold shops at Corromandel Plaza was to be assessed as business income. The issue of additional depreciation was remanded to the CIT(A) for adjudication.
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