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TMI Blog2019 (5) TMI 1640X X X X Extracts X X X X X X X X Extracts X X X X ..... s capable of being let legally. The legislative intention that the property which is legally habitable but it is not occupied by the owner then the annual value of such lettable property shall be deemed as income under the head House Property . Hon ble Bombay High Court in the case of Shree Nirmal Commercial Ltd Vs CIT [ 1991 (4) TMI 91 - BOMBAY HIGH COURT] wherein it was held that if the property is of such nature that it is inherently incapable of being let out and the assessee owner thereof, then the charge u/s 22 cannot arise. In present case the property in question was granted the occupancy / completion certificate only on 01.07.2015, so the property in question for the both the assessment years 2011-12 and 2012-13 could not have construed to be properties capable of being legally let so as attract the rigors of Section 23(1)(c). We note that the view entertained by us now finds legislative support in sub-section (5) of Sec. 23, wherein the Legislature has provided where a builder holds flats as its stock in trade then the annual value of such property shall be taken as NIL for a period of two years from the end of the financial year in which the certificate of completio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditions of the allotment. The AO after perusal of the terms and conditions of allotment noted that point No. 2 of the terms and conditions mentions: 2. The expression Allotment wherever used herein shall always mean Provisional Allotment and will remain so till such time a formal deed of transfer is executed and registered in favour of the Allotte for his / her respective Apartment 4. After taking note of the aforesaid point No. 2 of the terms and conditions, according to the AO, it is evident that mere allotment does not amount to transfer and as such the assessee was the rightful owner of such apartments in the year under consideration. According to the AO this fact is further confirmed by the fact that the assessee was mentioning such apartments in its inventory, in its books of accounts and had also recognised revenue from such transfer. Accordingly, the contention of the assessee was held to be untenable and for that the AO relied upon the Hon ble Delhi High Court decision in CIT vs Ansal Housing Finance Leasing Co. Ltd. (2013) 29 taxmann.com 303 (Delhi). After reproducing para No. 13 and para No. 14 of the said order, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n construction and sale of flats in the years in which the construction was completed and possession was handed over to the purchasers concerned notwithstanding the fact that the deeds of conveyance had not been executed and is registered in favour of the purchasers. According to the learned senior counsel, the buyers of the respective flats were in exclusive possession of the respective units purchased by them against full and valuable consideration paid to the assessee. In order to buttress the fact, the learned counsel drew our attention to page No. 25 of the Paper Book from where we note that the list of apartments shown in closing finished apartments for A.Y. 2011-12 and drew our attention to the name of allottees which we note as 12 allottees. However, the learned senior counsel fairly pointed out that out of the 12 allottees serial No. 1, 5 and 6 have been allotted flats in the subsequent assessment year i.e. in A.Y. 2012-13 and others 9 allottees have been allotted flats in this assessment year or earlier assessment years. Therefore, relying on the various judgments of the High Court as well as the Tribunal he contended that the date of allotment of that should be taken as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... building or any part thereof affected by any such work until permission has been granted by the Development Authority in this behalf in accordance with the rules and the regulations made under this Act. The learned senior counsel drew our attention to relevant portions of section 22 and 23(a) of the Act which is as under: 22. The annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy. For the purposes of any business or profession carried on by him the profits of which are chargeable to income-tax shall be chargeable to income-tax under the head Income from house property . 23.(1) For the purposes of section 22, the annual value of any property shall be deemed to be (a) the sum for which the property might reasonably be expected to let from year to year. 7. According to him section 22 can be attracted only if the property is owned by the assessee and it is in a position to be let out as habitable property. It is only when the property in complete in all respect and is certified by the local ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sec. 22 shall be deemed to be the sum of money which the owner/assessee might reasonably be expected to get by letting the property. We note that sub-section (5) has been inserted in sec. 23 by the Finance Act, 2017 w.e.f. 01.04.2018 which states that where the assessee has property which consists of any building or land appurtenant thereto which is held as stock in trade and the property or any part of the property is not let during the whole or any part of the year from the end of the financial year in which the certificate of completion of construction of the property is obtained from the competent authority shall be taken to be NIL. The relevant extracts of Section 22 23 of the Act as amended by the Finance Act, 2017 is reproduced hereunder 22. The annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purposes of any business or profession carried on by him the profits of which are chargeable to income-tax, shall be chargeable to income-tax under the head Income from house property . Annual value how determined. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pply only in respect of 36[one] of such houses, which the assessee may, at his option, specify in this behalf; (b) the annual value of the house or houses, 37[other than the house] in respect of which the assessee has exercised an option under clause (a), shall be determined under sub-section (1) as if such house or houses had been let. 38 [(5) Where the property consisting of any building or land appurtenant thereto is held as stock-intrade and the property or any part of the property is not let during the whole or any part of the previous year, the annual value of such property or part of the property, for the period up to 39 [one year] from the end of the financial year in which the certificate of completion of construction of the property is obtained from the competent authority, shall be taken to be nil.] 9. From plain reading of the aforesaid provisions of the Act, it is apparent that the annual value of the property is assessed as income in the hands of the owner . In order to attract the charge of tax under the head House Property it is necessary for the AO to prove that the assessee is the owner of the house prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e events harmoniously the only conclusion that one can draw is that the appellant was never owner of the apartments but its role was limited only to the Developer who held the apartments under construction in trust to be ultimately owned by the persons to whom the allotments were approved by the Board. We therefore find merit in the submissions of the Ld. AR that the appellant could never be regarded as owner of the finished apartments and in that view of the matter the provisions of Chapter IV-C was not applicable and therefore the notional annual value of the unsold flats could not be assessed in the hands of the appellant under Section 23 of the Act. 10. We also find merit in the submission that even though the value of finished apartments was included under the head Inventory disclosed in the Balance Sheet, yet such apartments could not be considered to be owned by the appellant for the purposes of Section 22 of the Act. From the detailed break-up of such inventory we note that the apartments included by way of Inventory were allotted prior to Balance Sheet date and in respect of such allotment the substantial part of the consideration was also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he right of occupancy thereof was completely transferred to the shareholders, the assessee still retained some residuary or vestigial rights of ownership, there are two difficulties in the way of the contention being accepted. First, the revenue had made no attempt to identify, quantify or evaluate such residuary rights of ownership. The second, and more formidable, difficulty is that the revenue is not able to show that the residuary or vestigial rights of ownership were of such nature as could be let out. In our view, unless the property owned by the assessee is of such nature as could be let out, the charge under section 22 of the Act cannot be attracted. In our view, if the property is of such nature that it is inherently incapable of being let out and the assessee owner thereof, then the charge under section 22 cannot arise. What is necessary for the charge under section 22 to arise is that the property be inherently capable of being let out. 12. In the given facts of this case, we note that the occupancy certificate for the Uttara Complex was issued by the local authority only on 01.07.2015 which is placed at pages 194 to 196 of the paper book. In absence of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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