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TMI Blog2019 (4) TMI 389X X X X Extracts X X X X X X X X Extracts X X X X ..... to tax such income is unsustainable in law in view of the various decisions cited in the preceding paragraphs of this order. - Decided in favour of assessee. - ITA No. 327/PUN/2018 - - - Dated:- 3-4-2019 - SHRI D. KARUNAKARA RAO, AM For The Appellant : Shri Nikhil Pathak 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 25.10.2017 for the Assessment Year 2014-15. 2. The only issue raised by the assessee-the builder in this appeal relates to the assessment of notional income calculated based on the deemed ALV with reference to the flats held as stock-in-trade and not actually let out. 3. The grounds raised by the assessee are as under :- 1] The learned CIT(A) erred in confirming the addition of ₹ 5,84,136/- u/s 22 r.w.s. 23(4) on account of deemed rent in respect of unsold unit held as stock in trade by the appellant company in various projects. 2] The learned CIT(A) failed to appreciate that the appellant firm had held these unsold unit as stock in trade and hence, as these units were occupied by the assessee for its busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... table Products Ltd., 88 ITR 192. 7. Before me, ld. Counsel for the assessee submitted that this issue now stands covered in favour of the assessee in view of the favourable judgement of Hon ble Gujarat High Court in the case of CIT vs. Neha Builders (P.) Ltd., 296 ITR 661 (Guj.). The ratio of the said judgement is that the deemed rented income earned out of the flats held as stock-intrade is not taxable under the head income from house property . For this proposition, he relied on Pune Bench decision in the case of M/s. Cosmopolis Construction vs. ITO vide ITA No.230 231/PUN/2018, order dated 12.09.2018. Further, ld. AR submitted that the Pune Bench of the Tribunal considered the Hon ble Delhi High Court s decision in the case of CIT vs. Ansal Housing Finance And Leasing Co. Ltd., 354 ITR 180 (Delhi) which is a case of actual let out flats of the unsold property i.e. stock-intrade. The Tribunal distinguished the judgement of Hon ble Bombay High Court in the case of CIT vs. Sane Doshi Enterprises, 377 ITR 165 (Bom.) which is again a case of actual let out . Further, as per ld. AR, in other cases, the judgement of the Hon ble Supreme Court in the case of CIT vs. Vegetable Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome on the 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 national 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on business. The assessee rented out unsold flats 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 property constructed by the assessee, is assessab leu nasso lidn cpoomrtei ofnr oomf 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 Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rib.); (ii) M/s. Runwal Constructions vs. ACIT in ITA No.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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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