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TMI Blog2019 (4) TMI 368X X X X Extracts X X X X X X X X Extracts X X X X ..... ion under the head income from house property . Therefore, the ground no.1 raised by the assessee is allowed. - ITA No.1711/PUN/2018 - - - Dated:- 3-4-2019 - Shri D. Karunakara Rao, AM For the Appellant : Shri Nitin Desai For the Respondent : Shri M. K. Verma ORDER PER D. KARUNAKARA RAO, AM : This appeal is filed by the assessee against the order of CIT(A)-5, Pune dated 11.06.2018 for the Assessment Year 2015-16. 2. The grounds raised by the assessee are as under :- 1. On facts and circumstances prevailing in the case and as per provisions Scheme of the Act it be held that, Hon ble Commissioner of Income Tax- (Appeals) (Hon ble CIT(A)) erred in confirming the addition made by Learned Assessing Officer (Ld. A.O.) on account of deemed rent from unsold units lying in closing stock under the Head Income from House Property. The addition of ₹ 87,941/- made by Ld. A.O. sustained by the Hon ble CIT(A) is improper, unwarranted, unjustified and contrary to the provision of the Act and facts prevailing in the case. The addition so made be deleted. The appellant be granted just and proper relief in the respect. 2. Without prejudice to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and assessee used another flat as Guest House for use/stay of the employees and guests of the assessee. The Assessing Officer computed the Annual Lettable Value (ALV) of these two flats invoking the provisions of section 23(1)(a) of the Act and worked out the ALV at ₹ 87,941/- after granting deduction u/s 24(1) of the Act. 4. Aggrieved with the said action of the Assessing Officer, the assessee filed an appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee. The treatment of the said unsold flats and the income thereof is the core issue for the assessee to file the present appeal before the Tribunal. Otherwise, the CIT(A) discussed this issue in para 19 of her order and upheld the views taken by the Assessing Officer in the matters of taxation of notional rent under the head income from house property . Thus, it is a case of computation of notional rent of the two flats, which were not only actually rented out and never happened to earn the rental income out of the said two flats. 5. Aggrieved with the above views of the CIT(A), the assessee is in appeal before the Tribunal with the above extracted grounds. 6. The grounds raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent year 2012-13 order dated 22.02.2018; and, (iv) Shri Girdharilal K. Lulla vs. DCIT in ITA No.1604/MUM/2016 for the assessment year 2011-12 order dated 17.11.2017, ld. Counsel for the assessee submitted that these decisions were pronounced in the context of facts where unsold flats were never let out and notional income was taxed as business income . 9. Narrating the present facts of the case, ld. Counsel submitted that it is not the case of the Assessing Officer or the CIT(A) that the notional income is taxable as under the head business income . Ld. AR emphasized the point that the Assessing Officer erroneously invoked the provisions of sections 22 to 24 of the Act. Therefore, the said provisions of the Act are inapplicable as held by the above-said series of decisions of the Tribunal (supra). 10. On the other hand, ld. DR for the Revenue relied heavily on the orders of the authorities below. 11. On hearing the above submissions of both the parties, I find this case stands covered by series of decisions of the Tribunal in favour of the assessee. The decision of the Pune Bench of the Tribunal in the case of M/s. Cosmopolis Construction (supra) is relevant to the prese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... flats held as stock-in-trade. In so far as the facts narrated by the ld. AR of the assessee, there is no dispute. 7. The issue before us for adjudication is whether the notional annual rental value on unsold flats held as stock-in-trade by the assessee is to be assessed under the head Business Income or under the head Income from House Property . The Hon ble Gujarat High Court in the case of Commissioner of Income Tax Vs. Neha Builders (P.) Ltd. (supra) has held that where the property is held as stock-in-trade any income derived from stock would be income from business and not income from house property . The relevant extract of the findings of Hon ble High Court are as under : 7. From the order passed by the learned CIT(A), it would clearly appear that the case of the assessee was that the company was incorporated with the main object of purchase, take on lease, or acquire by sale, or let out the buildings constructed by the assessee. Development of land or property would also be one of the businesses for which the company was incorporated. 8. True it is, that income derived from the property would always be termed as 'income from the property, but if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and suo-motu offered rental income from the flats under the head Income from House Property . On the contrary the Revenue wanted to tax rental income under the head Business Income . The matter travelled to the Tribunal. The Tribunal held that the income earned by the assessee from renting of flats is to be assessed under the head Income from House Property . The Department carried the matter in appeal before the Hon ble High Court. The Hon ble High Court confirmed the findings of Tribunal and held that rental income received from unsold portion of property constructed by the assessee, is assessable as income from house property. The core difference between the case of the assessee and in the case of Commissioner of Income Tax Vs. Sane Doshi Enterprises (supra) is that in the case of assessee, it is notional annual rental income on flats held as stock which is sought to be taxed, whereas in the case of Commissioner of Income Tax Vs. Sane Doshi Enterprises (supra) it was the case of actual rental income earned by the assessee from renting of flats constructed by it. Hence, the decision rendered in the case of Commissioner of Income Tax Vs. Sane Doshi Enterprises (supra) w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .5408/Mum/2016 for the assessment year 2012-13, order dated 22.02.2018 (Mum.-Trib.); and, (iii) Shri Girdharilal K. Lulla vs. DCIT in ITA No.1604/Mum/2016 for the assessment year 2011-12, order dated 17.11.2017 (Mum.-Trib.) support the taxation of such notional rental income under the head business income . The undersigned are party to the decision of the Tribunal in the case of M/s. Cosmopolis Construction (supra). 12. In the present case, it is an undisputed fact that the assessee never let out the unsold flats held as stock-in-trade. Further, it is the case of the Assessing Officer that the provisions of sections 22 to 23 of the Act should be invoked for taxing the notional income on such flats. I also perused all the four grounds revolved around the provisions of sections 22 to 23 of the Act relating to the head of income i.e. income from house property. Further, it is an undisputed fact the provisions of section 23(5) of the Act was amended by the Finance Act, 2017 w.e.f. 01.04.2018 and, therefore, these provisions will not come to the rescue of the Assessing Officer for bringing the deemed income on such unsold flats to taxation under the head income from house propert ..... X X X X Extracts X X X X X X X X Extracts X X X X
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