2018 (3) TMI 1299 - AT - Income Tax

Annual letting value of unsold flats - Charging deemed income by taking Annual Letting Value(ALV) of unsold flat, which is closing stock of the assessee - Held that - As relying on case of CIT vs. Ansal Housing Finance & Leasing Co. Ltd. 2012 (11) TMI 323 - DELHI HIGH COURT wherein it is held that the annual letting value of the unsold stock i.e. closing stock is assessable as deemed rent in the hands of the assessee, assessed the same as deemed income. - Decided against assessee.

Summary

Issues:
Assessment of deemed income based on Annual Letting Value (ALV) of unsold flats treated as closing stock.

Analysis:
The appeals by two different Assessees arose from orders of the Commissioner of Income Tax (Appeals) confirming the action of the Assessing Officer (AO) in charging deemed income by considering ALV of unsold flats, treated as closing stock. The issue revolved around whether the ALV of unsold flats should be assessed as deemed rental income under the head Income from House Property. Both Assessees raised identical grounds challenging the addition made by the AO. The AO and CIT(A) relied on the decision of the Hon'ble Delhi High Court in CIT vs. Ansal Housing Finance & Leasing Co. Ltd. to assess the ALV as deemed income. The CIT(A) upheld the addition, emphasizing the nature of the Assessee's activities and operations related to the property, concluding that the income should be assessed as per the provisions of the Income Tax Act.

The Tribunal heard rival contentions and examined the facts and circumstances of the case. It noted that the issue was covered by the decision of the Hon'ble Delhi High Court in the case of Ansal Housing Finance & Leasing Co. Ltd. The Court emphasized that the levy of income tax on properties held by the Assessee was based on ownership, not on whether the Assessee carried out letting activities. The Court rejected the Assessee's argument that the ALV method for assessment was impermissible, stating that it was a reasonable method to determine tax liability. The Court also dismissed the argument that the Assessee's occupation of the properties until sold exempted them from income tax.

Additionally, the Tribunal addressed the Assessee's reliance on an ITAT Mumbai decision, stating that the issue was now settled by the Hon'ble Delhi High Court decision. As a result, the Tribunal dismissed the appeals of both Assessees, upholding the assessment of deemed income based on the ALV of unsold flats as closing stock.

In conclusion, the Tribunal affirmed the CIT(A)'s decision to charge deemed income based on the ALV of unsold flats, treating them as closing stock, in line with the provisions of the Income Tax Act and the precedent set by the Hon'ble Delhi High Court.